FYI - New NFA rule - no more hedging as of May 15th, 2009

[adubasu]

Thank you for clarifying Ken, I just saw that post pop up in email and started freaking out. ha ha

[Ken Long]

Originally Posted by Ken Long

And direct hedging is always available, if you follow the transactions, rather than the cumulative position. All direct hedging does is add to or subtract from the main position.

obviously, not currently available on the MT4 platform, and one of the biggest flaws in the MT4 platform. This style of account management is probably the bigest reason for these rulings, as it missleads traders into underestimating the total size of their position and the risk involved. It also makes it very difficult to position or trend trade on a longer time frame, where you often want to buy or sell partial positions, scaling into or out of a position.

These aberrations in the MT4 platform are all directly in line with increasing broker revenue by increasing individual transactions and limiting position holding.

This is not a major problem for most short term and day trading which is largely transaction based, but it does severely restrict long term traders, who these brokers dont really want to serve anyway.

[Killer-B]

Originally Posted by Ken Long

but in order to be compliant and maintain full functionality of the platform it seems likely it will be necessary to move out of the US. Otherwise these rulings will seriously impair the platforms usage, and make many EA's nonfunctional.

It is more than "seems likely" - seems these rules have already been passed, and are on the books to be rolled out in a few months - Point is, they are targeting MT4 traders (IMHO) - seems we must be making a dent - (read as successful) to have them react in such a manner - Whilst none of my current programs use a T/S or small S/L - seems they want everyone to go back to manual trading... as you'd have to "watch" all your USA-based trades 24x6 to manually catch a T/S or Limit Orders - which of course sucks, and defeats the purpose of using an EA -

Point being - I now have 4 accounts, one USA-based, and three outside (Cyprus, Lithuania, and Australia) - the 3 non-NFA accounts still allow me to hedge (Forex Funnel) - the USA one does not... so I just put it on "short only" and does fine.... but does rely on Limit Orders as part of its strategy... so this pisses me off more than you'll ever know.....

Jerry's "points" are scary - that is why he asked about them... Now if they're true or not, is a different story (which is why I'm sure the poster asked about their origin) - Lots of money to be made in FOREX - but in looking at those proposed restrictions, I suspect that would wipe out 99% of all current EA's functionality (as will MT5) - So I hope the MT5 programmers are "looking ahead" and try to outsmart (work around) these types of restrictions .... Or one would hope...

[Ken Long]

Jerry's points are scarry, but if implemented they would adversely affect all Forex brokers, when it seems most likely it is the MT4 brokers and the auto traders that are being targeted. As you said, because they are sucessfuly sucking noticable amounts of money out of the market which is not the way the system is supposed to work.

Now, if MT4 were to adopt a cumulative position based form of accounting, rather than their current transaction based accounting. They could still maintain a transactional accounting for the robots use, but for the NFA they would need a cumulative position to get around the hedging rules. That way any multiple transactions on the same pair would be applied to a cumulative position. This would potentialy solve the hedging rules.

The first in-first out ruling has little effect on the overall position. Once you are accustomed to looking at a cumulative position it doesnt really matter which transaction is closed first. This is more of a problem for the robots transactional trade management, which is a programing problem that is completely solvable. Its just a matter of adjusting ones thinking to a position management style of operations.