FIFO rule kills futures traders profits!

[Scataphagos]

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...!

That's your 1st problem. Very difficult to scalp the ES because of its "high noise".

 

[Ates]

That's your 1st problem. Very difficult to scalp the ES because of its "high noise".

I love noise. That's why i am a successful ES and NQ scalper. So that's not the problem at all

 

[Scataphagos]

I love noise. That's why i am a successful ES and NQ scalper. So that's not the problem at all

Power to you!

 

[bone]

Just for clarity, in the futures universe FIFO and Pro Rata are order matching algorithms employed by the futures exchanges - doesn't have anything to do with the brokers. If you change anything about your initial order (such as quantity), that requires a new message it requires a new order tag and you go to the back of the order queue line. Same on CME, ICE, Eurex, LIFFE, SIMEX, etc..

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???

 

[bone]

Then put your big boy pants on and get TT X-Trader and clear an FCM directly.

You mention all of these smallish Introducing Broker firms - you do realize that you are going through three ECN's, doubling your messaging and running two risk checks? That's not an optimum scalping situation by any standard.

I love noise. That's why i am a successful ES and NQ scalper. So that's not the problem at all

 

[newwurldmn]

Just for clarity, in the futures universe FIFO and Pro Rata are order matching algorithms employed by the futures exchanges - doesn't have anything to do with the brokers. If you change anything about your initial order (such as quantity), that requires a new message it requires a new order tag and you go to the back of the order queue line. Same on CME, ICE, Eurex, LIFFE, SIMEX, etc..

he’s referring to lot allocation, not execution on the floor

 

[bone]

I'm referring to electronic order matching. Lot allocation on the screen. FIFO and Pro Rata.

he’s referring to lot allocation, not execution on the floor

 

[newwurldmn]

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...!

We have used average prices at our company. It’s really hard to do post transaction analysis because you have to recreate the entire stream of trades.

If you need it because it’s affecting your decision making then either 1. You have to do it yourself (I do this in excel), 2. You have to switch software, 3. You have to challenge why it’s affecting your decision making.

 

[newwurldmn]

I'm referring to electronic order matching. Lot allocation on the screen. FIFO and Pro Rata.

I know. OP is referring to lot allocation for the purpose of realized gains.

 

[bone]

I know. OP is referring to lot allocation for the purpose of realized gains.

OP has other problems that he is blissfully unawares of. Like doubling his message routing (two credit checks per message - Ouch!) because he uses Introducing Brokers. If he used TT and cleared an FCM directly he'd be a big boy scalper.