FIFO rule kills futures traders profits!

Ates

Ates

Hi Traders,

FIFO: First in first out
LIFO: Last in first out

I'm a futures trader and tried many brokers. All of them use FIFO rule and it kills me. Trading is hard (and hardest way to make money). FIFO rule makes it harder.

I never ever enter full lot. Let's say i am trading 10 lots ES. I usually start with 3 or 5 lots and average my position as it goes against me. I will give you an example why FIFO is evil.

I will use round numbers for the simplicity.

1. I go long ES at 3500
2. ES goes 10 pts against me and i add at 3490
3. Now my avg entry is 3495 which is equal to Entry = 3495
4. Now price goes 10 pts against me and i added 1 more at 3480
5. Now my entry is 3490 "(3480 + 3490 + 3500) / 3 = 3490"

I hope all is clear now. Now price starts to go my direction. Here's what i do...

1. Price hits 3490
2. I only leave 1 contract and take others off. I close 2 lots
3. Now my platform gives me 1 losing trade and 1 breakeven (and commissions) because of FIFO rule and my platform moves my entry from 3490 to the last entry which is 3480 and i will see 10 pts profit as my open P&L. (This is not TRUE)
4. Price goes back to 3480 and i add one more now my platform will show me 3480 x 2 lot.

Here we go. The reality is my entry should be (3480 + 3490) / 2 = 3485

I totally understand this approach but this is wrong. They have to keep the average entry until we close entire position.

Do you there's a way to do this? I use Motivewave, Tradovate and Tradingview but i couldn't find any solutions.

Why is that important?

I want to see my average entry plotted on chart until i close my entrie position and i want to see my real average entry not the ones left.

What do you think???
 
My broker offers "net" and "force to open" positions.
When I force them to open they stay like independents positions so I can treat the last one independently than the first one.

That way I can create grids at levels, dividing the market into chunks. I managed to break even most of the time and eventually make some profits with the reamining ones. Still have to realise loses when the markets goes into a strong trend against me, so there's room for improvements.
 
angrytrader said:
My broker offers "net" and "force to open" positions.
When I force them to open they stay like independents positions so I can treat the last one independently than the first one.

That way I can create grids at levels, dividing the market into chunks. I managed to break even most of the time and eventually make some profits with the reamining ones. Still have to realise loses when the markets goes into a strong trend against me, so there's room for improvements.
More...

Which broker, platform and instruments is this ?
 
angrytrader said:
Spread betting in the UK. All brokers that offer CFDs have these types of positions.
More...

Ok, if it is CFDs/ spread betting, then this is clear. All those brokers usually let you select between a netting and hedging type account
 
Ates said:
Hi Traders,

FIFO: First in first out
LIFO: Last in first out

I'm a futures trader and tried many brokers. All of them use FIFO rule and it kills me. Trading is hard (and hardest way to make money). FIFO rule makes it harder.

I never ever enter full lot. Let's say i am trading 10 lots ES. I usually start with 3 or 5 lots and average my position as it goes against me. I will give you an example why FIFO is evil.

I will use round numbers for the simplicity.

1. I go long ES at 3500
2. ES goes 10 pts against me and i add at 3490
3. Now my avg entry is 3495 which is equal to Entry = 3495
4. Now price goes 10 pts against me and i added 1 more at 3480
5. Now my entry is 3490 "(3480 + 3490 + 3500) / 3 = 3490"

I hope all is clear now. Now price starts to go my direction. Here's what i do...

1. Price hits 3490
2. I only leave 1 contract and take others off. I close 2 lots
3. Now my platform gives me 1 losing trade and 1 breakeven (and commissions) because of FIFO rule and my platform moves my entry from 3490 to the last entry which is 3480 and i will see 10 pts profit as my open P&L. (This is not TRUE)
4. Price goes back to 3480 and i add one more now my platform will show me 3480 x 2 lot.

Here we go. The reality is my entry should be (3480 + 3490) / 2 = 3485

I totally understand this approach but this is wrong. They have to keep the average entry until we close entire position.

Do you there's a way to do this? I use Motivewave, Tradovate and Tradingview but i couldn't find any solutions.

Why is that important?

I want to see my average entry plotted on chart until i close my entrie position and i want to see my real average entry not the ones left.

What do you think???
More...

Your thread title is misleading. Your profits haven’t changed. Just the accounting of them.

why not do it yourself in excel?
 
newwurldmn said:
Your thread title is misleading. Your profits haven’t changed. Just the accounting of them.

why not do it yourself in excel?
More...
I'm a scalper. And the P&L and the Entry i see on chart confuses me. I don't know how many times i tought i am in profits and closed my positions in loss. So title doesn't mislead...!
 
This is just how the position is reported in your software.
Take a simpler case:
Buy 1 at 3500
Buy 1 at 3600
Your average is 3550
Price then moves down
Sell 1 at 3550

The other person/counterparty who sold to you originally. Are they giving you 50pt profit or 50pt loss?
That's partially why the rule works.
 
Ates said:
I'm a futures trader and tried many brokers. All of them use FIFO rule and it kills me. Trading is hard (and hardest way to make money). FIFO rule makes it harder.
More...

I don't see how it does. Unless the way remaining contracts are displayed (average?) causes you to trade differently... ??

You buy some at some price. You sell at another price. Each contract has an entry and exit price + net result. Don't see how that's "killing you". ??
 
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