Some execution providers use a different method for computing profits and losses (e.g., average price method) or do not retain correct cost basis for overnight positions. In those cases, the profits and losses your execution provider is showing will not match PropReports. PropReports uses an intra-day First In, First Out (FIFO), followed by overnight FIFO methodology. Although a P&L may appear different, when the entirety of the position is closed out the traders end P&L will be equal using either accounting method.
If you are curious about how FIFO can affect the reporting of your P&L, please Please read through the examples below .to see exactly how FIFO differs from another accounting approach such as the Average Price Method:
Average Price Method
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If one share of Company XYZ's stock is purchased on Monday for $1.00, two shares on Tuesday for $1.10 and 1.05 respectively, and two shares on Wednesday for $1.15 and the other at 1.20, the average-price method assumes that five shares were purchased for an average cost of $1.10. This number is arrived at by adding $1.00 + $1.10 + $1.05 + $1.15 + $1.20 and dividing the sum by 5, because there are five shares total in the pool. Using the Average Price Method: - Selling 5 shares at $1.30 would realize a gain of $1.00 (1.30 * 5 - 1.10 * 5).
- Selling 1 share at $1.30 on Thursday would realize a gain of $0.20 ($1.30 - $1.10).
- Selling 1 share at $1.30 on Wednesday wouldn't make a difference if using the average price method and the gain would be again, $0.20 ($1.30 - $1.10).
- Selling 3 shares on Wednesday at $1.30 would equal a gain of $0.60 given: (($1.30 - $1.10) + ($1.30 - $1.10) + ($1.30 - $1.10)).
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1 | Monday | Buy | 1 | XYZ | $1.00 | 2 | Tuesday | Buy | 1 | XYZ | $1.10 | 3 | Tuesday | Buy | 1 | XYZ | $1.05 | 4 | Wednesday | Buy | 1 | XYZ | $1.15 | 5 | Wednesday | Buy | 1 | XYZ | $1.20 |
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