How trade matching works

Trade Matching

Trade Matching is nightmare for unequal number of shares, especially if an active trader trades same stock repeatedly

Example

Let us assume an active trader made the following trades Buys 500 shares of ABC Corp. for $20 per share on 03/12

Sells 234 shares of ABC Corp for $18 per share on 03/14

Buys 300 shares of ABC Corp for $16 per share on 03/15

Sells 66 Shares of ABC Corp for $19 per share on 03/16

Sells 250 Shares of ABC Corp for $22 per share on 03/19

Sells 150 Shares of ABC Corp for $20 per share on 03/19

Buys 200 shares of ABC Corp for $18 per share on 03/21

Sells 300 Shares of ABC Corp for $22 per share on 03/22



Based on the above transactions can you tell which sell orders correspond to which buy orders? What if you have 1000 such transactions? According to the IRS, in most circumstances you should use First In First Out (FIFO) order matching. In the above example FIFO requires matching Trades 2, 4 and 5 with Trade 1. The remainder (50 shares) of Trade 5 is then applied to Trade 3 along with all of Trade 6 and 100 shares of Trade 8. Not so easy!

Moreover, most Brokerage firms don't even provide stock purchase transaction information when they send Form 1099, consequently forcing you to use your trade history to figure out the cost basis for each trade. Do you have time to do all these mappings and compute the cost basis for each trade? With Simply Track you can do it with a click of the mouse.