Direct Market Access CFDs or DMA CFDs are probably one of the most transparent types of CFDs available. DMA CFDs have the benefit of enabling participation in the underlying market of the equity over which the CFD is based. DMA CFDs are fairly new and have only become popular in Australia over the last couple of years however, they continue to become prevalent as traders understand the transparency offered by this sort of Contract for difference.
DMA CFDs have substantial advantages over the more usual over-the-counter (OTC) kind in that they permit the trader to participate in the opening and closing phases of the market. Having the ability to operate in these phases of the market offer major advantages to traders as they can obtain the opening or closing price of the day. Traditional over-the-counter CFDs do not allow the trader to take part in these phases of the market thus preventing the trader from having the ability to receive some of the best prices of the trading day. In spite of the drawback of not being able to take part in the opening and closing phase of the market, over-the-counter CFDs do have the benefit of allowing the trader to buy or sell volumes that may not be available in the underlying market during normal trading hours.
DMA CFDs have become accepted amongst day traders and scalpers. The major reason for their attractiveness is because DMA CFD providers allow CFD trades to flow onto the underlying market in the equity on which the CFD is based permitting active traders to make the most 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 disadvantages of DMA CFDs is that usually DMA CFD providers don’t offer guaranteed stop loss orders. Guaranteed stop loss orders have the benefit of allowing the trader to control their downside risk. Slippage often takes place when using stop-loss orders, guaranteed stop-loss orders eliminate this risk altogether.
It’s essential to be aware that prior to opening a CFD account you should bear in mind that when trading DMA CFDs you will required to deposit a higher initial margin amount than the over-the-counter (OTC) type. Along with higher margins many DMA CFD providers will not be able to offer you CFDs over indices and foreign exchange contracts due to these contracts being over-the-counter in their very nature.
There are actually relatively few platforms available offering DMA CFDs, probably the most widespread platforms in the Australian market is webiress. WebIRESS provides the speed and reliability day traders and scalpers need along with a variety of different order types including trailing stop-loss orders. Another popular platform is ProDeal, ProDeal offers all of the advantages webIRESS offers with the extra benefit of having the ability to trade over-the-counter CFDs from the same platform enabling traders to trade CFDs on indices and forex from their DMA CFD account.
It is important that before making the commitment to begin trading DMA CFDs you recognize the risks connected with the product. Like all geared products trading CFDs offers large rewards on the other hand there’s also risks involved that if not managed right can lead to losses larger than the trader’s initial deposit.
Before selecting a DMA CFD provider you must ensure that you test their demo platform and read their Product Disclosure Statement which outlines in detail the fees and charges, gives trading illustrations, and outlines the sorts of CFDs offered together with the risks and benefits of trading CFDs. You should make certain that the Contract for difference provider you decide on can give you the platform and products that fit your trading plan.
