GFT settlement date adjustments?

M

method_air

I've been trading equities since 2001 and am looking to get into the forex market. I was browsing GFT's website and noticed that they charge something called a "settlement date adjustment"? If I'm understanding this correctly, my P/L can differ from the closing price depending on the current price of the settlement date?

For example, if I bought a lot of EUR/USD for 1.27 on Monday and sold it for 1.37 on Wednesday, my profit will be calculated based on the price of the settlement date of Friday (T+2)? And if the price on the settlement date happens to drop to 1.27 would that mean I would break even? Do all brokers charge this adjustment?

I searched the forums and couldn't find an answer. It's hard for me to comprehend this concept coming from equities since the P/L is based on the closing price of the stock.
 
No, thats not what it means. When you close a trade your profit in loss is in the qoute currency, which is converted back to dollars on settlement. The risk is to open foreign currency profit or loss between the close of your trade and the settlement. This can work for or against you, but is pretty minimal unless you are swinging some really big numbers. To avoid it trade EUR/USD, GBP/USD or any other pair where the qoute currency is the USD. The best way to visualize it is that if you are trading USD/JPY, your profit and loss is in yen, so until settlement day you incur market risk on that amount.
 
Quote from FJMcC:

No, thats not what it means. When you close a trade your profit in loss is in the qoute currency, which is converted back to dollars on settlement. The risk is to open foreign currency profit or loss between the close of your trade and the settlement. This can work for or against you, but is pretty minimal unless you are swinging some really big numbers. To avoid it trade EUR/USD, GBP/USD or any other pair where the qoute currency is the USD. The best way to visualize it is that if you are trading USD/JPY, your profit and loss is in yen, so until settlement day you incur market risk on that amount.
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best way to avoid such BS is trade with a broker that doesn't do this kind of thing, and thats 99% of brokers out there.
 
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