Stop Loss policy under new NFA rules
The National Futures Association (NFA), our industry's self regulatory organization in the United States, has informed all Forex Dealer Members, that it has adopted new Compliance Rule 2-43(b) regarding Forex trading.
The rule requires orders be executed First In, First Out (FIFO).
This FIFO rule soon found a flaw - stop loss orders available at brokers' trading platforms, which allowed placing stops on individual tickets on the same currency pair and be executed as soon as price reaches a specified level. Filling stops at requested price for multiple positions that are held in the same currency pair became impossible with FIFO rule, which says that a position which was first opened must be the first to close.
As a result, regular stops the way traders know them will no longer be allowed with NFA brokers, instead,
For Buy Positions: Placing an entry order to sell below the price where you got into the position protects you
For example, if you have a BUY EUR/USD position at 1.3900, you could place:
For Sell Positions: Placing an entry order to buy above the price where you got in protects you from additional
For example, if you have a SELL EUR/USD position at 1.3900, you could place: