ANALYSIS FORTH QUARTER 2020
The underlying LVS account in Darwinex has closed the forth quarter of the year with a loss of -7.34% (including floating P/L). We are going to dedicate this quarterly analysis of 2020 for explaining the changes that we are going to implement in 2021 more than to the analysis of the quarter itself, which remains in negative territory of the previous quarters.
The first and most important change is the inclusion of equity indexes (via CFDs) in the portfolio. We have been studying the possibility of adding other assets to diversify LVS’ portfolio during the last two years. We started looking at some commodity and stock indexes (mostly gold and silver) just before Darwinex introduced micro-lots in indexes. From the point of view of diversification, this allowed us to build a portfolio focused on these assets and implement it in an account with a reasonable capital.
We have now built a portfolio with 5 indexes that work on a trend following directions in timeframes of at least 1 Hour (to avoid market noise of shorter timeframes) without losing the ability to get into important trends.
Our systems can work both long and short, always looking for the volatility breakout. Trading hours will focus on those with the highest volume to avoid possible liquidity problems and their consequences for investors (divergence).
Regarding the indexes used, we have 2 american indexes (SP500 and Nasdaq) and 3 european (DAX30, CAC40 and UK100). We also have other indexes under review but we are not going to include them at the moment because the minimum trading lot is very large compared to the rest and have too much weight (such as the Nikkei 225). AUS200 index is being studied and is also scheduled implementation in the medium term.
Talking about commodities, gold strategies are ready to include them and will be added in the short term.
In the currency section, we have totally restructured our portfolio. During 2020 we have seen that the systems that worked in shorter timeframes (15-30 minutes) have not worked properly. The low volatility has also damaged us leading to accumulate many false entry signals. According to our analysis, the longer timeframes have worked much better and that is why we have started the restructuring of the portfolio from there, maintaining diversification in currencies but reducing the number of sets. On the other hand, we have implemented a control over the maximum duration of trades to maintain a good balance between the potential of the trade and the cost of the swap.
Activity in FX systems will be lower than our historical average and the weigh will be between 40-50% in the new portfolio. The rest will belong to indexes systems.
To finish, we closed the year 2020 very disappointed, but we think that with these changes we have taken an important step in improving our management. We hope to return to results more in line with our historical course in this coming year.
Feycox Development S.L.