No more hedging orders NFA – list of MT4 brokers you can’t used

So there are 14 forex brokers left in the US that are registered with NFA, according to what I read here. Back in Oct 2008, there were 29.

Of the 14 US-brokers registered with NFA, a good number of them had introduced MT4 platform. Many months back, there were fewer. Here is a table to list which of these brokers have MT4 and which do not have MT4 platforms.

NFA registered FX brokers	Platforms	UK Operations with MT4
IBFX	MT4
FXCM	MT4, Trading Station, Active Trader	Yes
MB Trading	MT4, MBT Navigator
Alpari	MT4	Yes
PFG	MT4, Best Direct, FX Express, ProTrader
Gain	MT4, ForexTrader	Yes
Ikon	MT4, Tradeview
Oanda	FXTrade, FXGame
Forex Club	ExpressFX, ClassicFX
CMS FX	VT Trader
GFT	Dealbook360
FX Solutions	GTS
IG Markets	PureDeal, L2 Dealer
Easy Forex

Some questions on your mind:

1. What about others not in the list eg FXDD? The answer is: they are not registered NFA members (yet).

2.What about this-and-that platform that xxx-broker has? This is not a comprehensive list. I just want to highlight those who have MT4 platform and with the no hedging rules by NFA, you can’t execute hedging on MT4.

3. What about no hedging on other platforms besides MT4? I have no idea because I only use MT4. But it should apply nevertheless.

4. Why talk so much about MT4? It is the fastest growing platform, with the most number of forums on it. It is also an easy-to-use platform and many are attracted to it because of the Expert Advisers (EAs) you can write to automate your trading strategy. Read more here.

5. What is the last column for? Well. if you must hedge and you are stuck with MT4, get out of the US and go somewhere, like in column 3!

Lastly, I am not a customer of every single broker listed here, and so my knowledge of them is based very much on what you can find and read on the Internet and their websites.

No more hedging orders NFA – danger of multiple EAs on one account

So you can’t hedge now with US-based brokers of NFA Rule 2-43b. What is also means is that you should not run multiple EAs on the same account if the EAs trade using the same currency pair.

Yes, in the past you can differentiate your orders based on the MagicNumber provided by MQL4. You can even differentiate further using the OrderComment() or some other means. Metatrader will be able to tell which order came from which EA and even be programmed to be independent of each other even though they are running on the same account.

But with this restriction of Rule 2-43, you can’t do multiple EAs anymore unless your EAs operate on different currency pairs. So EA traders, watch out.

No more hedging orders NFA – tales of three brokers

Today is the dateline to implement the new NFA rule for no hedging. Judging by how three leading US brokers have reacted to and implemented the NFA Rule 2-43, the chaos created by NFA and loss of retail forex business for US will be felt for some time. Let’s see what they did and let’s see if you can identify them.

1. The obedient and filial broker – this broker is filial to NFA and follows everything to the core; not only have they implemented the rules, they have done it even earlier than the dateline. And what they have done is to reinforce that hedging is forbidden and many other strategies cannot be used. There are no other solutions and the only way  forward if you still need to hedge is to leave this broker.

2. The rebellious but creative broker – this broker said they are planning innovative ways to circumvent the whole situation; unfortunately there is not enough time. The dateline to meet the obligations was 18 May 2009. And this creative broker managed convince NFA to wait and WILL NOT make any changes for now.

3. The insightful and entrepreneurial broker – this broker is entrepreneurial and had already expanded overseas. Their solution is the best and simplest – go do it outside USA where NFA has no jurisdiction! Their solution is the best because they get to keep all their customers.

So who are these brokers?!

No more hedging orders NFA – delaying FIFO implementation

In my previous entries, I have mentioned that the First-In-First-Out (FIFO) processing of orders is part of the new NFA Rule 2-43b requirement. And looking at how some brokers have implemented the new rule, it seems that the FIFO requirement is not required.

Well, the truth is NFA has agreed to delay the this FIFO requirement until 31 Jul 2009! Read their notice here.

So there is no running away from it. Time to recode a number of routines.

No more hedging orders NFA – first look from the first broker

The changes expected when the NFA Rule 2-43b will be implemented from 15 May 2009 are as follows, in order of certainty.

1. No buying and selling on the same currency pairs for market orders.

2. No buying and selling stops or limits on the same currency pairs that is in opposite directions.

3. Allowing multiple orders of the same currency pairs for the same type of orders.

4. As a result of point 3, First-In-First-Out processing of orders.

We have a frontrunner broker as of today who have started implementing the NFA 2-43b. The first three points mentioned above has been implemented but not the fourth point. So hedging refers to all opposing type of orders ie be they market or pending (stops or limits) and these are disallowed. If you choose to place orders in the same direction, you can do so with market or pending (stops and limits). And when you close these orders, it can be in any order.

One of my burning question is : what happens when the buy stops and sell stops for the same currency pair is such that if they are ever triggered, they will be stopped out first before the opposing order is triggered. And the answer now: disallowed.

No more hedging orders NFA - Grid Hedge

What is a Grid Hedge Strategy? First you determine a starting price point. From the this price point you built a series of buy trades above this price point. Simultaneously you do the same with sell orders below this price point.

Usually the orders are placed equi-distance from each other. The variations come with different or same lot volume for each trade order or the number of grid points you want to have.

The key to grid hedging is not having stoplosses for the orders. Having a stoploss will affect the performance of your grid significantly. The example below has a setting of GridStep= 20pips, GridNo=20 for a eurusd backtest from 1 Jan 2009 to 28 Apr 2009. The first chart has no stoploss while the second has a stoploss fix at 50 pips.

Fig. 1 - GridHedge with no stoplosses

Fig. 2 -GridHedge with stoplosses

With no stoplosses, the strategy over the stated period achieved a profit factor of 3.8. With stoplosses in place, the profit factor is only 1.1.

The Grid Hedge can also be combined with different stoploss and takeprofit techniques, but suffice to say that it requires the buy and sell orders to float in the system. That is the key to success for GridHedging.

No more using of such strategy for NFA brokers!

P.S. This strategy is not everyone’s cup of tea. It requires a high drawdown to survive the ups and downs of prices until the required profit target is reached.

Automated Trading Championship – Will not be held for 2009

There will be no ATC2009! MetaQuotes said in their website that they would like to concentrate on releasing MQL5 this year and hence the Championship this year is cancelled. Instead, they will hold the Championship next year based on MQL5.

And what is MQL5? Another language to learn, EAs have to be rewritten and  more about MQL5 in future entries….

So this is it, no more blog entries on this topic except one last one to share the results of wetoea after ATC2008.

No more hedging orders NFA – the rule243 turmoil for EAs

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?