FIFO and LIFO?

Could please explain the difference between FIFO and LIFO?

FIFO: First in First out

LIFO: Last in first out.

They are generally accounting terms used for different methods of calculating stock inventories. For example first in first out means that the first stock bought is the the first stock to be sold.

Last in first out is the other way around.

You can imagine if you are a large company who buys the same product at different points in the year to then re sell, the price difference you buy it for over the year can make the accounting for that stock difficult when at different accounting periods (say the end of each quarter) there will be certain amounts of stock left over that hasn't been re sold yet and the problem is what do we cost this stock as? Was it the stock we bought first at $2 per unit or the stock we bought later at $2.10 per unit. The FIFO and LIFO are adopted simply for a systematic way of accounting for this annoyance when doing the books so an accountant or firm will choose to use one or the other for consistancy)

In trading your broker will use FIFO and LIFO in the same way, just using units of currency so using FIFO the first units of currency that you bought will be the first to be sold. I've never herd of a broker that uses LIFO though.

Example. If you buy 20,000 EUR at 1.5 then buy another 20,000 EUR at 1.6 and you then want to sell 25,000 EUR at whichever price, they will sell your first 20,000 from your 1.5 (first position) and your next 5,000 at 1.6 (your second position.

First in first out

Thanks for the detailed explanation!