The National Futures Association (NFA) Rule 2-43(b) requires that orders be offset on a First In, First Out (FIFO) basis when multiple positions are held in the same quantity for the same currency pair. This takes place after 31 July 2009.
What does this mean?
If you already have an open deal for e.g. EUR/USD for 100,000, then if you open another deal with the same currency pair for the same amount (ie EUR/USD for 100,000) then you will have to ensure the first deal you opened is the first deal you close.
How is my deal closed?
Your deal can close in one of 3 ways – it either reaches its Stop Loss limit, it reaches its Take Profit limit, or you go in and manually close the deal.
How can I ensure the first deal I opened closes first with my Stop Loss or Take Profit orders?
The Easy-Forex® platform will automatically prompt you with a pop-up window requesting you to set Stop Loss or Take Profit limits that are larger (further away from the market rate) than those of your previous deals. This will ensure you are in compliance with the FIFO rule.
Please explain this further?
For example; if the first EUR/USD (buying the base/selling the quote currency) deal you opened has a Stop Loss of say 100 pips away from the market rate then in the next EUR/USD deal you open (for the same amount) our system will not let you set a Stop Loss closer to the market rate, it will have to be 101 or more pips away. And the same applies for the Take Profit rate.
What if I try to close my deals manually?
You will only be able to close the deals in the chronological order in which you made them. Remember this is only for deals of the same currency pair for the same volume or amount.
What happens if I modify my open deals?
You can change your Stop Loss and Take Profit limits on your open deals at any time, however, you will only be able to change them in a manner that stays within the regulation. For example, if your first deal’s Stop Loss is 100 pips away from the market rate, you will only be able to modify the Stop Loss of your 2nd deal to be at least 101 pips away or more.
Does FIFO rule apply if I open a deal of different size?
No. You can open a deal with same currency pair but for a different amount. For example, First deal of EUR/USD is for 100,000 and second deal is for 150,000 – you can choose to the close second deal and keep the first deal open. You do not need to close the first deal first.
What about opening deals in the same currency in different directions?
This is also called hedging and you are not able to have two or more concurrently open deals in different directions, regardless if they are of differing amounts. For example, you cannot open a deal buying the EUR / selling the USD and then open another deal selling the EUR versus buying the USD – even if the amounts are different.
Easy-Forex® is a fully regulated member of the NFA and a supporter of our traders using proactive risk management strategies (setting of Stop Loss and Take Profit orders).
Please check our Terms and Conditions regarding the FIFO rule. If you have any more questions contact your Account Service Manager who will be more than happy to explain this rule.