As you have probably heard, the NFA ( National Futures Association ) has recently enacted a regulation which effectively eliminates hedging, because brokers are now forced to close trades on a First In First Out (FIFO) basis. This means that multiple open positions will be consolidated and netted off to one single position without the trader consent and request. This will much disadvantage traders who are running hedging strategies, multiple hedging expert advisors and systems.

Metatrader 5 has a build-in support of this new NFA regulation. When you open a buy & sell position on the same symbol, it will be automatically consolidated into 1 netted position. Thats why NFA regulated brokers will like Metatrader 5. And because of the same reason, traders probably will much dislike this new Metatrader feature.

It is not clear yet, if the current Metatrader brokers will automatically switch to the new Metatrader 5 platfrom, or they will continue to offer MT4 along with MT5.

Regarding the brokers: Alpari and FXDD announced already that they will offer the Metatrader 5 beta to their clients.

Read more about Metatrader 5 Brokers

4 comments

Joshua said... @ October 25, 2009 at 7:18 PM

http://www.forexfactory.com/showpost.php?p=2791245&postcount=1

http://www.forexfactory.com/showpost.php?p=3160717&postcount=200

These are some links as to why brokers may want to downgrade to MT5 and a reason to stick to MT4 or transfer to another platform all together.

Joshua said... @ October 25, 2009 at 9:00 PM

After playing with the MT5 beta for a few days, and reading the comments here and at other forums, the issues / complaints seem to be along these two lines:

1) The No Hedging / FIFO rule the NFA has created and that MT5 explicitly enforces is a pile of cr-p.

2) The change in MQL5 from MQL4 and the incompatibility of the two is double cr-p.

Let me say, I agree with both points and state what I think the reasons that they have gone this direction.

A) As to the Hedging / FIFO rule, what people don't usually think about is that stocks, options, and futures all follow this method of accounting. I assume that the Futures Brokers, who really control the National FUTURES Association, want a piece of the forex market. So, they just make all NFA forex brokers adhere to their accounting standards and voila, it is much easier for them to enter the market and get their current customers to enter the forex market. Also, MetaTrader wants to get into the futures, stocks and options trading game, so they had to have this kind of trade accounting to even compete. It's cr-p, but it is an explanation.

B) As to the MQL5 compatibility issue they have moved to a much more object orientated programming model. Events, properties, objects, etc are now all part of the language. This is much more of the model that those outside of the forex market understand. Why they didn't do what say NinjaTrader did and allow for C# code is their decision, but they do get the advantage of controlling the feature set better and locking people into their codebase more.

In sum, I think the MT5 release is as much for non-forex traders as it is for forex traders. We have always known that the guys who make MetaTrader know a think or two about programming, but not much about trading...and this this is just more evidence of that fact.

Besides there are other great MT4 plug in tools that allow for a much better and fully featured trading interface for the platform.

miranon said... @ October 26, 2009 at 9:25 AM

Hello Joshua, thanks for your comments, i completely agree with you about the No Hedging / FIFO rule of the NFA. I think MetaQuotes had no choice but to implement their rules. :/

About MQL5: i think the MT5 becomes now more EA oriented, especially since there are much more possibilities with MQL5, thats why MetaQuotes also organize each year the championship for EA's.

A positive point of non compatibility of MQL4 and MQL5 - now only the best from the thousands of indicators and EA's will be rewritten for MT5, so we can leave all the old crap behind. :)

Paul said... @ November 10, 2009 at 2:33 PM

Although a little complicated to code, I think it is quite feasible (and I guess I'm about half-way there so far) to write a "virtual order manager" in MQL5 which maintains non-FIFO orders on the terminal with FIFO orders on the server. See my blogpost here http://paulsfxrandomwalk.blogspot.com/2009/08/virtual-order-manager.html

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