In securities trading, the term first in, first out or FIFO refers to a structure in which positions are closed in the same order in which they are opened. The first positions to be opened are the first positions to be liquidated.
The first in first out structure is used in the trading of many different investment instruments, including forex, stocks and futures. It provides greater compliance with standards set out by the National Futures Association – a self-regulatory organization which caters to futures and derivatives trading service providers in the United States.
In a broader sense, the term first in, first out denotes a method of accounting and inventory valuation in which the costs of the oldest inventory are used to determine the cost of goods sold (COGS).
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