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Dear Students,
On Tuesday, November 24th, 2009, FXDD had notified all of its clients that it will begin implementing strict compliance with all NFA Rules and Regulations. This change in protocol is due to their anticipated registration with the NFA, and primary reason why there is a difference between your daily account statement and FXDD recording dealer blotter, MetaTrader Platform. Just like FXDD have mentioned inside the original email, the trading history provided on the MetaTrader platform is for trade ticket reference only, and is not an official account statement.
Your daily statements are generated from FXDD’s back office, which is compliant with all CFTC and NFA regulations regarding hedging and FIFO. As a result, all open trades on a specific pair are treated as a single position and follow a concept of weighted average. Your account statement displays a single value that is meant to typify a list of values that are within the same currency pair. So, your MetaTrader, which is recording tool, might display two separate orders for the same currency pair, but FXDD Backoffice will treat them as one, since they are within same currency pair and display it as one, with a weighted average price. How do you calculate a weighted average? Lot size x rate + Lot size x rate, etc. add all of these up and divide it by the total lot size.
Example: 0.1 @ 1.1450, 1.3 @ 1.5050 and 3.2 @ 1.3940.
So, (0.1 x 1.1450 + 1.3 x 1.5050 + 3.2 x 1.3940) / (0.1 + 1.3 + 3.2) = 1.419956522
Because FXDD treats it as a weighted average, you can still close any position in any order on MetaTrader side, but it will be settled against weighted average in the Backoffice. As a result, this change should not affect your trading style and should not affect your EA if you use one.
In regards to offsetting positions, you need to recognize that MetaTrader4 Platform, is FXDD recording system and Backoffice, is FXDD reporting system.
So let’s create an instance, where you place an offsetting position:
EUR/USD Market rate is at 1.4950/1.4952
You place a Buy at the ask, which is 1.4952; And you place a Sell at the bid, which at 1.4950
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MetaTrader (DEALING BLOTTER)
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Backoffice (REPORTER)
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| 1.0 BUY EUR/USD @ 1.4952 Profit: -2 pips
1.0 SELL EUR/USD @ 1.4950 Profit: -2 pips
SO, TOTAL -4 pips |
Profit: -2 pips and NO OPEN POSITIONS
SO, TOTAL -2 pips |
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Now, let’s say the market moves to 1.4960/1.4962
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| 1.0 BUY EUR/USD @ 1.4952 Profit: +8 pips
1.0 SELL EUR/USD @ 1.4950 Profit: -12 pips
SO, TOTAL -4 pips |
NO OPEN POSITIONS |
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Now, you want to close a position in profit of 8 pips
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| Balance will increase by 8 pips.
Equity will still be down by negative 4 pips.
And one open position of 1.0 SELL EUR/USD @ 1.4950 Profit: -12 pips |
Since it is no longer an offsetting position:
Backoffice will originate a SELL position at the closing price of BUY position:
1.0 SELL EUR/USD @ 1.4960 Profit: -2 pips |
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NET EFFECT
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| +8 and -12 = -4 pips |
-2 and -2 = -4 pips |
The account statement above is an actual representation of the trading occurring in your FXDD trading account for the day or month indicated. Trades placed in your account, and shown on your account statement, have been offset First In First Out (”FIFO”) as required by NFA Compliance Rule 2-43(b). What this means for you is older trades of the same size and symbol are always offset before newer trades of that size and symbol. The account statement information may differ from the data appearing in your MetaTrader4 (”MT4″) platform or any transaction record generated from your MT4 platform. All information from the MT4 platform is for informational purposes only and is not representative of the FIFO offsetting occurring in your account and as required by NFA Compliance Rule 2-43(b).
Thank you.
Best regards,
ESA Trader Management Team
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