JCL's Forex: Forex Trading Life

Limit orders & stops, FIFO and the new no hedging rule

Posted: 29 Jun 2009 05:32 PM PDT

Re: Limit orders & stops, FIFO and what we need to do regarding the new no hedging rule the CFTC approved on recommendations from the NFA

jordan: writing up a note regarding the changes coming at the end of July/August
greg: are limit orders / stops being outlawed?

Brokers are handling this in different ways. First let's discuss the new hedging rule. Simply put any US broker no longer is able to offer hedging. Oanda never allowed hedging however has always offered sub-accounts which is an effective way to trade any pair both ways at the same time. FXCM is transferring customer accounts to their UK offices if you desire to be able to hedge.

greg: I think this is maybe a US thing? I can still hedge with Alpari, maybe UK rules different??
amir: uk doesnt have to comply with nfa. So yeah, that's correct uk rules are different and nfa regs dont apply
greg: Seems crazy why the NFA are doing this
ajay: I have FXCM only. They have been very good to me. Last month when US regulators stopped hedging, lot of people switched over to UK FXCM. I am sure Oanda will have to follow same reglations
jordan: Oanda dwarfs other brokers in capitalization
jordan: valued at $1.2 billion - Silicon Alley Insider, The World's Most Valuable Digital Startups. #10, you know just behind companies like Facebook, Wikipedia, Craigslist, Mozilla Corp & LinkedIn http://www.businessinsider.com/sai25
jordan: sure they have done their homework (there is no hedging w/ Oanda, they offer sub-accounts however which we have always used (4 & 8 hour seperate accounts)
sledge: I moved my account to UK 1.5 months ago, problem solved for now, Also with the MT5 changes the order handling will be a bit different from what I have read
ajay: Sledge I was tempeted to move my account too. Is you money safe? and how fast you get your money back.
jordan: sure, UK banks are real safe - http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5639474/British-banks-highly-vulnerable-to-future-shocks-Bank-of-England-warns.html
sledge: yeah most of the larger brokers have UK branches, ask them and they will transfer your account
greg: really great article. Joy. I already had money in an Iceland bank which went bust, that was fun
sledge: yeah most of the larger brokers have UK branches, ask them and they will transfer your account

FIFO (First In First Out) Rule

Some brokers are currently only applying FIFO to hedging. Talk to your broker asap to find out exactly how they are going to handle it.

tony: Jordan do FIFO chang our trading for long term?

jordan: confirming with Oanda right now

jordan: is Oanda getting rid of stops and limits (take profits) orders as per the new CFTC approved no hedging rules.
OANDA: No. New rules should not affect the FXTrade platform, as we are already in compliance with hedging restrictions and FIFO rules.

Regarding the FIFO ruling and it's application by various brokers:

1. There is no consensus on the rule and how it is going to be applied. Some brokers are stating that MT4 will not be used (until MT5 is released) b/c it won't be compliant, and others are saying that they have it compliant so don't worry.

2. There is no consensus on whether it is just meant for hedges or for all positions (such as would be used in a grid strategy). Some brokers say it is for all and others just for hedges.

Do the new FIFO rules effect our trading?

tony: Jordan does the first in first out (FIFO) change our trading for long term?
jordan: it depends; those not using Oanda and using a US broker would no longer be able to trade the ZLC along with the Drop In trade as if they were long a pair on a ZLC trade and then took a Drop In trade on a pullback when it came time to exit the Drop In trade into profit the ZLC trade (which was placed first) would be exited.

The Drop In will be fine once the new update is released (which is taking profit earlier and spliting from 2 to 3 orders) will be able to be traded by anyone using any broker anywhere in the world.
vets: Hello Jordan, Hello everyone