Why To Professional DMA CFD Traders Prefer DMA CFDs?

Posted by fts on 02 September 2010

Direct Market Access CFDs or DMA CFDs are among the most transparent varieties of CFDs available. DMA CFDs have the advantage of enabling participation in the underlying market of the share over which the Contract for difference is based. DMA CFDs are rather new and have only become popular in Australia over the last couple of years however, they continue to become prevalent as traders realize the transparency obtainable by this variety of CFD.

DMA CFDs have considerable advantages over the more established over-the-counter (OTC) type 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 considerable 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 obtain among the best prices of the trading day. Despite 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 available in the underlying market during standard trading hours.

DMA CFDs have become accepted amongst day traders and scalpers. The key reason for their attractiveness is because DMA CFD providers allow CFD trades to flow onto the underlying market in the share on which the CFD is based allowing active traders to make the most of relatively small price changes. Using DMA CFDs also allows day traders to get set at the opening price at the start 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 in the main DMA CFD providers don’t offer guaranteed stop loss orders. Guaranteed stop loss orders have the advantage of enabling the trader to control their downside risk. Slippage often occurs when using stop-loss orders, guaranteed stop-loss orders eliminate this risk altogether.

It’s essential to be conscious that prior to opening a CFD account you ought to bear in mind that when trading DMA CFDs you may required to deposit a larger initial margin amount than the over-the-counter (OTC) kind. In combination with higher margins many DMA CFD providers 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, 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 common platform is ProDeal, ProDeal offers all of the benefits webIRESS offers with the extra benefit of having the ability to trade over-the-counter CFDs from 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 start trading DMA CFDs you are farmiliar with the risks connected with the product. Like all geared products trading CFDs offers large rewards however there can be risks involved that if not managed properly can lead to losses larger than the investors initial deposit.

Prior to picking a DMA CFD provider you should make sure that you test their demonstration platform and read their Product Disclosure Statement which outlines in detail the fees and charges, gives trading illustrations, and outlines the kinds of CFDs offered along with the risks and benefits of trading CFDs. You should ensure that the CFD provider you choose can give you the platform and products that fit your trading plan.

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