What is this MT4, MT5...is this marketing talk?

[salamanderforex]

First part means that if you have opened a BUY trade in EURUSD your trading software will not allow you to open a SELL trade in EURUSD while the buy order is open.

FIFO means that the open trades have to close in chronological order so if you have placed 4 BUY trades in EURUSD (trades 1, 2, 3, 4) then you will have to close them in the same order, 1, 2 ,3, 4. you cannot close trades 2 3 or 4 before trade 1
If your trading software has a CLOSE ALL function , it will close them in FIFO order .

These are silly rules in my opinion and one day they will probably be removed.
I don't know what purpose they serve, it seems to me that they are only there for to give 1 more edge to the brokers (as if they haven't got enough edges....)

Thanks for the explanation. Very well explained. What world of unthoughtful programmers do you live in? IBKR allows you to put through any order any time anyhow you want. They just execute when they match.

You said "hedging" so I got interested. IBKR also has a hedge feature but really you can do that same thing by adding another order so it's really useless and aesthetic. You can do it faster using their API than selecting with mouse clicks anyway. But what got me interested was that your said hedging was banned. What does that mean? How can anyone stop you from hedging? Hedging being buy one thing and another thing to lower your risk.

 

[HobbyTrading]

Thanks for the explanation. Very well explained. What world of unthoughtful programmers do you live in? IBKR allows you to put through any order any time anyhow you want. They just execute when they match.

You said "hedging" so I got interested. IBKR also has a hedge feature but really you can do that same thing by adding another order so it's really useless and aesthetic. You can do it faster using their API than selecting with mouse clicks anyway. But what got me interested was that your said hedging was banned. What does that mean? How can anyone stop you from hedging? Hedging being buy one thing and another thing to lower your risk.

I'm afraid that you got confused by the used terminology. Forex brokers (the ones who usually provide MT4/MT5) have a different usage of the words "hedging" and "netting". Your IBKR account is an example of a netting account: for any instrument you get to see your net position size, resulting from multiple buy and sell orders. In MT4/MT5 this works differently. Here you can have multiple open positions, in the same instrument (e.g. EURUSD), with an opposite sign. This is called a "hedging account". So you can be both long and short at the same time in an instrument. In MT4/MT5 you have to specify which of the open positions you want to close. If you have multiple open positions in one instrument and you close one of them, the net result is that you still hold an open position as the others still remain.

 

[billv]

What world of unthoughtful programmers do you live in?.

LOL welcome to the world of spot forex.

I used a US broker 10 or so years ago but the FIFO was driving me crazy so I left.
I have not tried IBKR, I looked into IB some years ago but I didn't proceed (I don't recall the reason).

 

[salamanderforex]

I'm afraid that you got confused by the used terminology. Forex brokers (the ones who usually provide MT4/MT5) have a different usage of the words "hedging" and "netting". Your IBKR account is an example of a netting account: for any instrument you get to see your net position size, resulting from multiple buy and sell orders. In MT4/MT5 this works differently. Here you can have multiple open positions, in the same instrument (e.g. EURUSD), with an opposite sign. This is called a "hedging account". So you can be both long and short at the same time in an instrument. In MT4/MT5 you have to specify which of the open positions you want to close. If you have multiple open positions in one instrument and you close one of them, the net result is that you still hold an open position as the others still remain.

This is interesting. Yes, I can't have both a short and a long position of same instrument on IBKR. If I take the opposite position it simply liquidates my other position. IBKR keeps only one account so it just liquidates positions as soon as money is there. Even if I deposit USD it applies it to my short USD position which is not nice. What if I don't want my short USD position to be liquidates at an odd hour by an administrator who deposits the money...

I thought MT4/MT5 is just a software and nothing to do with broker. So, should I look for MT4/MT5 from a broker to know if they allow multiple positions open or not?

I haven't tried, but maybe one can be short CFD on a pair on IBKR and long the actual currency. Still, that is only two positions.

 

[HobbyTrading]

I understand the confusion. It happened to me. I had an account for a number of years with IBKR before I opened an account at a forex broker because I wanted to experiment with MQL5 on MT5. It is then that I got to understand that things can be very different from what you're used to at IBKR.

So, should I look for MT4/MT5 from a broker to know if they allow multiple positions open or not?

Indeed, it is broker dependent. The broker will specify whether you will be getting a hedging account or a netting account. In some cases, not often, does the broker allow you to choose.

 

[mlawson71]

Usually opening multiple positions is not an issue? Or does the anti-hedging legislation in the US make that a problem?

 

[billv]

I thought MT4/MT5 is just a software and nothing to do with broker. So, should I look for MT4/MT5 from a broker to know if they allow multiple positions open or not?

Yes it is just software but what is allowed and what is not allowed is dependent on the broker's server which is configured as per the regulations which apply to your region, The opposite trade restriction and fifo is US specific.

Many US traders get around these rules by opening trading accounts with unregulated or loosely regulated brokers but then they risk not seeing their money again. Even if you open an account with regulated UK or Australian brokers they will be complying with US regulations.

I haven't tried, but maybe one can be short CFD on a pair on IBKR and long the actual currency. Still, that is only two positions.

Most traders don't need to open opposite positions but if hedging forms part of your trading strategy then you could do what you've mentioned
Or you could operate 2 separate trading accounts and go long in 1 account and short in the 2nd.

 

[billv]

Usually opening multiple positions is not an issue? Or does the anti-hedging legislation in the US make that a problem?

No this is not an issue so if you are averaging into a position with multiple trades you can open as many trades as it is allowed by your account's leverage.

 

[salamanderforex]

Thanks.

Yes it is just software but what is allowed and what is not allowed is dependent on the broker's server which is configured as per the regulations which apply to your region, The opposite trade restriction and fifo is US specific.

1- So if the broker software allows it then in MT4/MT5 software this can be done as well. If broker doesn't allow it on their own software then MT4 and MT5 can't do it either. Am I getting that right?

2- Side question: Why use MT4 / MT5 and not just broker provided software. I mean, what is a real life example that gives an edge?

Many US traders get around these rules by opening trading accounts with unregulated or loosely regulated brokers but then they risk not seeing their money again. Even if you open an account with regulated UK or Australian brokers they will be complying with US regulations.

3- You mean they lie on the application and say they are not a US person while they are? Few brokers applications I saw require one to declare if they are a US person or not very clearly.

Most traders don't need to open opposite positions but if hedging forms part of your trading strategy then you could do what you've mentioned
Or you could operate 2 separate trading accounts and go long in 1 account and short in the 2nd.

True, you can open two accounts but second account has to be in someone else's name (in case of IBKR for example) and trading their account without being a professional is not allowed I think. Also, two account only gives two positions. What if someone digs themselves a hole and wants to have 10 positions (5 long and 5 short) - (thinking they will get to riches anytime now) - on the same pair then they will need 10 accounts and having only one wife this can be hard to achieve.

4- What are the best brokers in the world after IBKR? (I haven't found any other broker beat them for fees).

 

[billv]

So if the broker software allows it then in MT4/MT5 software this can be done as well. If broker doesn't allow it on their own software then MT4 and MT5 can't do it either. Am I getting that right?

Yes because MT4 and MT5 connect to the broker and send trade execution commands

Why use MT4 / MT5 and not just broker provided software. I mean, what is a real life example that gives an edge?

Unsophisticated traders are unlikely to get an edge from MT4 or MT5 but it is popular because the data feed is free and because it is widely used in the forex/cfd trading community. As a popular SW, there are virtually thousands of free indicators and scripts available for it and traders download and install these various tools which make their lives easier.
I use MT4 because it is highly customizable and I can automate my trading strategies and have my open trades managed in a way which gives me an edge.

You mean they lie on the application and say they are not a US person while they are? Few brokers applications I saw require one to declare if they are a US person or not very clearly.

They don't necessarily lie on the application. The requested ID docs will clear up any confusion.

What are the best brokers in the world after IBKR? (I haven't found any other broker beat them for fees).

There is no such thing as a best broker, there are +ves and -ves with all of them as there are pluses and minuses with their software platforms too, so we simply sign up with a broker who meets most of our requirements.