A.I.M. Users Bulletin Board

[Conrad]

Hi Fuzzy,

I know that the FIFO & FILO are general concepts and have all sorts of applications. . . the most obvious would be the storage of food stuffs in a warehouse to make sure the food lots are not getting stale. . in that case the FILO would not be a smart thing to do.

The with Forex trading thing: would it make ANY difference at all for the Profit Function?

If one has 4 lots on his account, bought at

Dollar price
10
5
2
1
and the price starts rising above the 1 to say 2, one can choose to sell A) the $ 1 Lot or B)the $ 10 Lot.
In Case A there is a 100% realized profit for the 1-Lot
In case B there is a 100% unrealised profit for the 1-Lot

In both cases there is an unrealiased loss on the 10 and 5 Lots.

If the price never return to 10 that 10-Lot suffers a loss in any case. If the price does return to 10 the profit on the 1-Lot is 10-fold and the profit is 9. . .On the 10-Lot there is n gain, so I can't figure out if one or the other method gives an advantage or not in the long run.

My "feel" is that it strongly depends on the risk profile for the equity. If the price fluctuations would follow a 50/50 risk profile I would venture to say that there is no difference in portfolio profit (or loss) for the various options for the selling sequences.

I can not put my finger on this gut-feeling that it makes no difference but to prove it is another thing