What are the implications of a First-In First-Out (FIFO) for offsetting transactions for Rule 2-43b. Apparently it is just not about doing a long and then when you “hedged” and do a short on the same currency pair, your long will be offset first. If you issue another long order followed by a previous long order, your first order needs to be processed first. In order words, if you have a first long order with no takeprofit set, and then you issue another long order with a takeprofit, the second cannot be processed because FIFO means the first long order has to be closed!
How many strategies will be affected! A simple CloseAllOrders script now has to look for the very first entry and close it first, followed by the next earliest order. You can’t close randomly now. In fact you can’t even close orders that are later than the first!
What about pending orders, ie stops and limits? Which ever way you go, you still need to process the first order first.
This rule is going to cause the US brokers confusion and the traders using them. It’s worst for EAs traders. Because of its automated nature, you might wipe out your own account executing in this new rule environment. Although the date of 15 May 2009 has been set, brokers who has no non-US operations will now have to think of new solutions, and we have not heard from any yet.
What shall we do in this turmoil? If your EA executes more than one order per currency pair at any instance of time, be they market or pending orders, don’t use them for now. Switch to one that issues one order per currency pair at any one time.
If your broker suggest you transfer out to a non-US operation, go for it. The hassle to understand how your US-based broker is going to implement this rule will stall your EA operation for a while.
If you are stuck with the current US-broker and you don’t have any EA strategy that don’t use “hedging” in their definition, you can either take a break, do manual trading or switch broker. Whatever it is, don’t execute your EA or worst still, leave them unattended thinking that things are going to remain the same.
For example, IBFX will be switching to this rule on 8 May 2009, earlier than the 15 May 2009. They said to use their demo servers to check out what the new rule means. Excuse me, nothing has changed and they still allowed hedging on the same currency pairs. Yet they are going to switch over to the new rule soon. And their reply on pending orders drew a “We don’t know the answer”. So you still want to leave your EA running next week?
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