CFTC + NFA: End Of Hedging? | Forex Factory

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CFTC + NFA: End Of Hedging?

  • #1
  • First Post: Edited Apr 16, 2009 3:19am Apr 14, 2009 7:02am | Edited Apr 16, 2009 3:19am
NFA has received notice that the Commodity Futures Trading Commission has approved new NFA Compliance Rule 2-43 regarding forex orders. The prohibition on carrying offsetting transactions will be effective for any positions established after May 15, 2009. The requirements regarding price adjustments will become effective as to all customer orders executed after June 12, 2009.

Offsetting Transactions

New Compliance Rule 2-43(b) requires an FDM to offset positions in a customer account on a first-in, first-out basis, thereby prohibiting a trading practice commonly referred to as “hedging.” A customer may, however, direct the FDM to offset same-size transactions even if there are older transactions of a different size. Rule 2-43(b) is effective for any positions established after May 15, 2009. Offsetting positions that were established prior to the effective date do not have to be liquidated, but once either position is closed out after May 15, it may not be reestablished as a hedge.

You can read more about this news in these links:

http://www.nfa.futures.org/news/news...ArticleID=2273

http://www.nfa.futures.org/news/PDF/...Adj_112408.pdf
  • #2
  • Apr 14, 2009 8:23am Apr 14, 2009 8:23am
These new changes can affect a number of trading strategies in the Retail sector and being aware of these changes can allow you to prepare appropriately so that one does not have a fit when their orders aren't being executed in the manner they had been used to. An informed trader has advantages.....
  • #3
  • Apr 14, 2009 3:28pm Apr 14, 2009 3:28pm
Move funds away from USA, that's my way to go...
  • #4
  • Apr 14, 2009 5:48pm Apr 14, 2009 5:48pm
Remember, this only affect US traders and brokers. Moving your account over seas should fix that problem. It seems more targeted towards Metatrader clients, as MT give clients a way to open both a Buy and Sell order at the same time.

There is already a thread that discusses this issue
http://www.forexfactory.com/showthread.php?t=137836
  • #5
  • Apr 14, 2009 6:22pm Apr 14, 2009 6:22pm
Quoting Jhig
Remember, this only affect US traders and brokers. Moving your account over seas should fix that problem. It seems more targeted towards Metatrader clients, as MT give clients a way to open both a Buy and Sell order at the same time.

There is already a thread that discusses this issue
http://www.forexfactory.com/showthread.php?t=137836
Ah yes, the conspiracy... US VS METATRADER... Are you for real?

You think your non metatrader broker isn't raping your money? Seriously? Its against bucketshops mostly. I.E Every retail broker in existance.
  • #6
  • Apr 14, 2009 7:15pm Apr 14, 2009 7:15pm
Besides, did anyone ever say you can't just go open a second account elsewhere to go the opposite direction? Bueller?
  • #7
  • Apr 15, 2009 1:56pm Apr 15, 2009 1:56pm
I just became aware of this rule and for me it is very disturbing as my whole stragey depends on what would be considered "hedging". I open and trade on an intraday time frame and carry it out (assuming it survives) to a longer time frame.

While this longer trade is running, if in a couple of days a trade comes along in the opposite direction, I'll take that trade (assuming it meets the entry criteria) and hold it as long as it will go. I don't necessarily cancel the other open trade, as the more recent trade may just be a retracement.

So does anyone one know, if we can open two accounts with our US brokers? One account just for "longs" and another account just for "shorts". This would ensure that NO trade going in each account is "hedged" but still allow us to trade according to our established trading plan.

Does anyone know the answer to this question?
  • #8
  • Apr 15, 2009 2:13pm Apr 15, 2009 2:13pm
It would depend on the broker, I assume.

MBTrading allows for multiple accounts, I would guess that most do but I really don't know if it's the industry practice or what.
  • #9
  • Apr 15, 2009 5:25pm Apr 15, 2009 5:25pm
InterbankFX allows for 3 accounts without any question. If you want more than that, you will be required to explain why.
  • #10
  • Apr 15, 2009 8:49pm Apr 15, 2009 8:49pm
Could anyone explain the reason why they are doing this?

Cheers!
  • #11
  • Apr 15, 2009 9:37pm Apr 15, 2009 9:37pm
hey guys, i heard that this morning too ! Actually i don't really understand what is hedging but im using a MARTINGALE EA... am i alright ????
Trading Forever !!!
  • #12
  • Apr 16, 2009 12:41am Apr 16, 2009 12:41am
I use a very successful hedging strategy coupled with averaging down my positions that go against me. On the way down, I use hedge positions to gain additional pips so I can close out my averaged down positions sooner as price finally comes back. In fact, it does not have to come all the way back to the average because my closed hedge trades allow me to become positive sooner. Pretty soon they will outlaw averaging down as a smart trader that trades small can use this tactic quite profitably. Especially on the EUR/CHF as the price range is very tight.

Using two brokers can be challenging as they are the market makers and price differences can be huge. Plus its a hassle altogether.

I am out of Forex for good. Make no mistake about it, this rule is to help the brokers as I am quite certain there are many successful strategies that use hedge. This could be the ONLY reason it has been "outlawed". See ya.
"Its not where your at, but where your coming from"
  • #13
  • Apr 16, 2009 3:08am Apr 16, 2009 3:08am
opening 2 account means we have to split our fund and we will get margin call more easily if we were to use the same lot size as before. IMO, they should give us a choice to choose whether we want hedging enable or not. Is like giving us 1:100 leverage and there is no other choice becoz higher leverage is bad for your account.
  • #14
  • Apr 16, 2009 3:12am Apr 16, 2009 3:12am
I use an Ea with hedging + martingale + waves (and a limit in progressions) with a lot of success into ibfx Broker and now I must stop it and withdraw my money and find another Broker.
But... a broker without any regulation?. Hmmm... I donīt like it.
  • #15
  • Apr 16, 2009 3:16am Apr 16, 2009 3:16am
I once read about hedging like this being used as a way to reduce taxes. Open a hedge months before you do your taxes, close the loser and count it as expenses/losses, and then afterwards close out your Profitable trade. Works out thesame I suppose, but It would be Ok If you had a reason for not wanting to pay so much tax the year you did it.
Living the adventure in my head.
  • #16
  • Apr 16, 2009 3:18am Apr 16, 2009 3:18am
Quoting cscheat
hey guys, i heard that this morning too ! Actually i don't really understand what is hedging but im using a MARTINGALE EA... am i alright ????
If itīs only martingale you have no problems at all, but if it uses martingale and hedging then you can not trade with that Ea. Look if your Ea opens buy+sell positions at once.
Some martingale Ea,s only open buy trade and if it fails the buy is closed and then it opens a sell trade (without hedging).
  • #17
  • Apr 16, 2009 4:09am Apr 16, 2009 4:09am
Posible solution to many EA,s using hedging or hedging+martingale (options "Only Long" or "Only Short"):

http://noponzi.com/hedging_NFA.png
  • #18
  • Apr 16, 2009 8:34am Apr 16, 2009 8:34am
Quoting joselb
If itīs only martingale you have no problems at all, but if it uses martingale and hedging then you can not trade with that Ea. Look if your Ea opens buy+sell positions at once.
Some martingale Ea,s only open buy trade and if it fails the buy is closed and then it opens a sell trade (without hedging).
thanks for the wonderful explanation brother !!!!! im using martingale "SHORT only" and is making a consistent few % per month... i was just shock this morning when i read the news that HEDGING prohibited ! LOL !

thanks bro !!! happy trading
Trading Forever !!!
  • #19
  • Apr 18, 2009 1:38pm Apr 18, 2009 1:38pm
EXACTLY how i trade athalon, and after a nice chat with FXCM on thursday, we got all the paper work for the move to their England unit.

Most of europe has nothing to do with the NFA and will be continuing Hedging as normal much to the relief of those who use the technique.

so what it does is remove money from this side of the pond and take it over to the other --- probably wont affect anyone greatly, but i would love to think of the brokers crying in their beer as they watch one after the other pull out and head for richer pastures

enjoy and trade well

mp



Quoting athalon7
I use a very successful hedging strategy coupled with averaging down my positions that go against me. On the way down, I use hedge positions to gain additional pips so I can close out my averaged down positions sooner as price finally comes back. In fact, it does not have to come all the way back to the average because my closed hedge trades allow me to become positive sooner. Pretty soon they will outlaw averaging down as a smart trader that trades small can use this tactic quite profitably. Especially on the EUR/CHF as the price range is very...
  • #20
  • Apr 19, 2009 6:01am Apr 19, 2009 6:01am
Quoting cscheat
thanks for the wonderful explanation brother !!!!! im using martingale "SHORT only" and is making a consistent few % per month... i was just shock this morning when i read the news that HEDGING prohibited ! LOL !

thanks bro !!! happy trading
The first in first out rule may interfere. I think people should go to court to stop this insanity (or dishonesty?) from NFA/CFTC. Read the NFA reasoning. They seem (or pretend) not to have a clue as to what real trading is about. Are these people qualified to tell us what is good and what is not? This is the biggest joke I have seen since I started trading.
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