Direct Market Access or DMA is the term frequently used to explain a variety of CFD that has grow to be prevalent within the Australian market, these are generally known as DMA CFDs. With DMA CFDs your deal is passed immediately through to the underlying equity market with no dealer or market maker involvement, which means orders are filled at the genuine market price and in a timely way with no re-quotes. Buying and selling DMA CFDs is very similar to trading shares via the internet.
DMA CFDs provide absolute order transparency. Traders are also able to take part in the market depth of the underlying equity over which the CFD is quoted by joining a bid or offer queue and also the open and closing auction phases of the market. DMA CFDs provide all the benefits of trading shares with all the added leverage that CFDs offer.
Buying and selling DMA CFDs is very similar to buying and selling shares, traders are able to hit the bid or offer or join the buy or sell queue. DMA CFD traders have significant benefits over traders using market made CFDs for the reason that they have got the potential to enter and exit trades at better rates.
When trading DMA CFDs you’ll be required to subscribe to exchange data, the cost of data varies from exchange to exchange. Once subscribed you will have access to real time rates and market depth allowing you to view the amount of buyers and sellers at each different price level and take part in order queues allowing partial fills and improved execution.
One shortcoming of DMA CFDs is that guaranteed stop loss orders are not offered, however they are not always necessary as typically DMA CFDs traders use options to manage their downside risk however these are generally overly complex for the amateur trader.
When buying and selling DMA CFDs traders have the ability to be price makers meaning that when an order is placed it’s always transmitted to the actual market and can have an effect on the value of the stock over which the CFD is based.
Trading CFDs using a Direct Market Access (DMA) model is best suited for frequent traders that trade on an intra day basis. Frequent traders will find that DMA CFDs will allow them to buy and sell freely without dealer involvement and obtain better prices when buying and selling. DMA CFDs are also suited to active day customers and day traders who are looking to exploit small price changes quickly.
There are a selection of CFD platforms that you can trade DMA stock CFDs on, the two most common platforms in Australia are web IRESS and ProDeal. Both platforms allow traders to participate in the market depth of the DMA CFD on which they are trading. The webIRESS platform is also extremely popular throughout the stock trading community, mainly because of the diversity of order varieties on offer, whereas ProDeal is extremely common amongst CFD traders, this is because of the broad range of CFDs on offer and its superior charting functionality.
It is imperative to note that before starting to trade DMA CFDs you you think about whether this type of Contract for Difference suits your trading style, choosing the wrong CFD variety will have an effect on the success of your trading system.
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Tags: CFD, DMA CFDs, web IRESS, webiress