Direct Market Access CFDs or DMA CFDs are considered one of the most transparent kinds of CFDs available. DMA CFDs have the benefit of enabling participation in the underlying market of the equity over which the Contract for difference is based. DMA CFDs are quite new and have only become common in Australia during the last couple of years however, they continue to become prevalent as traders understand the transparency offered by this variety of Contract for difference.
DMA CFDs have substantial advantages over the more traditional over-the-counter (OTC) kind in that they permit the trader to take part in the opening and closing phases of the market. Being able to trade in these phases of the market offer major advantages to traders as they can receive the opening or closing price of the day. Traditional over-the-counter CFDs do not allow the trader to participate in these phases of the market thus preventing the trader from being able to receive among the best prices of the trading day. In spite of the drawback of not having the ability to take part in the opening and closing phase of the market, over-the-counter CFDs do have the advantage of allowing the trader to buy or sell volumes that may not be obtainable in the underlying market during standard trading hours.
DMA CFDs have become accepted amongst day traders and scalpers. The major reason for their popularity is because DMA CFD providers allow CFD trades to flow onto the underlying market in the stock on which the CFD is based permitting active traders to take advantage of relatively small price movements. Using DMA CFDs also permits day traders to get set at the opening price at the beginning of the day and clear their positions during the closing price during the closing match phase.
One of the drawbacks of DMA CFDs is that by and large DMA CFD providers do not offer guaranteed stop loss orders. Guaranteed stop loss orders have the advantage of allowing the trader to control their downside risk. Slippage often takes place when using stop-loss orders, guaranteed stop-loss orders remove this risk altogether.
It is essential to be aware that prior to opening a CFD account you ought to bear in mind that when trading DMA CFDs you’ll required to deposit a higher initial margin amount than the over-the-counter (OTC) variety. Along with higher margins many DMA CFD companies won’t be able to offer you CFDs over indices and currency contracts due to these contracts being over-the-counter in their very nature.
There are relatively few platforms available offering DMA CFDs, probably the most common platforms in the Australian market is webiress. WebIRESS offers the speed and reliability day traders and scalpers need along with a selection of different order types such as trailing stop-loss orders. Another popular platform is ProDeal, ProDeal offers all the benefits webIRESS offers with the additional benefit of having the ability to trade over-the-counter CFDs through the same platform allowing traders to trade CFDs on indices and forex from their DMA CFD account.
It’s essential that before making the commitment to begin trading DMA CFDs you are farmiliar with the risks connected with the product. Like all geared products trading CFDs offers substantial rewards however there are also risks involved that if not managed properly can lead to losses greater than the trader’s initial deposit.
Before deciding on a DMA CFD provider you must ensure that you trial their demonstration platform and study their Product Disclosure Statement which outlines in detail the fees and charges, provides trading illustrations, and outlines the kinds of CFDs offered along with the risks and benefits of trading CFDs. You need to make certain that the CFD provider you pick is able to offer you the platform and products that fit your trading plan.
