It says that "You can AutoTrade as many trading systems as you like in one brokerage account – even if the systems trade the same things, and even if the systems trade in opposite directions!"
How will this work with Forex since US clients have to follow FIFO rules?
Thanks.
Adrian -
Our AutoTrade technology will offset positions as needed. So for example, let’s say you are trading two systems, A and B. Chronologically they do this:
SYSTEM A: SELL SHORT 9 EURUSD
SYSTEM B: BUY LONG 20 EURUSD
SYSTEM A: COVER 9 EURUSD
Your account will:
SELL 9 EUR
BUY 20 EUR (now your net position = long 11)
BUY 9 EUR (now your net position = long 20)
I think what you’re really asking is how FIFO profit/loss recognition works in these cases. Well, the thing to remember is that “it all comes out in the wash” … which is to say that when all the trades have been done and all the positions have been flattened, your total net P/L will be the same, no matter which trades you attributed to which systems in which sequence. Where FIFO matters is in marked-to-market profit recognition, which isn’t really germane to this. All that matters from C2’s perspective is that your accounts make the “correct” sell or buy offsets on a net basis in the right sequence at the right times.
Ultimately, when all is said and done, your single account’s results will be exactly the same as if you traded two systems in two separate accounts.
MK
Gotcha. Thanks.
“”"“Where FIFO matters is in marked-to-market profit recognition, which isn’t really germane to this.”"""
I am not sure this is “not germane.” (?)
I will soon publish an ETF system which “might” attempt to take advantage of wash rules by always briefly rebuying profitable positions within 30 days, when feasible within the strategy.
I am not a tax expert so I am not sure if this will work period. (If anyone knows about this, please reply.) But if this does work, then basically, a short-term trader can be paying discount long-term capital gains taxes, if he specializes on a few ETFs, as my systems do.
However, there are bound to be some unavoidable short-term gains. However, these can be offset for people following the system more than one year. I.e. use FIFO the first year, to enable the older shares to get older. Then use LIFO, to sell the oldest shares when they qualify.
But…
1. I have never auto-traded before. I don’t know yet if a c2 vendor is able to specify LIFO or FIFO. (?)
2. If so, can the subscriber edit this specification, which sometimes might not be suitable for the subscriber.
3. Suppose a subscriber has 2 or more systems trading the same ETFs. Yes, germane, I think.
4. Even within my one system, I will end up eventually with some subscribers who have been doing my system over one year, others who are new. So even if I could control LIFO/FIFO–it wouldn’t work unless I publish a second identical system for “old subscribers.” …And even then, still gets complicated…
I think you see where this is going…
Suggestion. (If not already done this way.) For USA taxpayers, C2-enabled software attempts to sell one-year old shares in any sale. When one-year old shares are not available, then the c2-enabled software sells the newest shares (not the oldest) thus allowing the oldest to get older until they qualify for the long-term tax discount. All regardless of whatever c2 system was trading these shares.
Or is this by chance already the case? Or am I just wrong about the wash rules? Thank you for any clarification, anyone.
P.S. After posting my message above, it occurred to me that a “smart auto-detection” option for LIFO/FIFO “should” be built-in to every online trading account. And perhaps this is available at MBtrading? Someone please let me know. All I know is, I don’t have it in my other accounts.
