Direct Market Access CFD’s

dma-cfdDMA stands for Direct Market Access and it is a type of CFD that is quite popular in some countries, Australia being one of them. Some call them DMA CFD. Since this type of CFD benefits from direct market access, you will find that you don’t have to deal with any market makers or dealers in order to get there. The passage of the trade you’re doing is direct, so you avoid losing money. You do this by going directly to the market with the order, at exactly the price of the market and without anyone else intervening. You will find that doing a trade with a CFD of the DMA variety is basically the same as buying or selling typical shares on the Internet.

One of the big advantages of a DMA CFD is the fact that there is transparency in that order. A trader that uses this type of CFD will benefit from the security that a CFD has since they can enter the offer queue or a bid. The traders can also take part in the market’s auction phases that are either closed or open. You will find that using a DMA CFD will give you the same benefits that regular shares would give you, while also offering you some extra leverage that the CFD is known for.

Since trading CFDs that come with DMA is the same as you would with a share, you are able to either join in the sell or buy queue, or you can just hit the bid. The trader that uses the DMA method will have an advantage over another trader that simply uses the CFDs from the market. That advantage comes from their ability to exit a trade, or to enter it, at a price that is better.

If you want to trade CFDs through this method you need to get a subscription to data concerning exchanges. That subscription will have a varying cost, depending on the exchange. Thanks to it you can get prices from the market in real time, plus information on how many sellers or buyers there are for each level of the price. You will be able then to be part in the order queue, giving you a better execution and even partial fills of the order.

It’s not all sunshine and rainbows though. The CFD with direct market access can have disadvantages as well. One of them would be the fact that you don’t have access to a guaranteed stop loss anymore. Instead, options have to be used in order to make the risk lower. Using options might be a bit more complicated for a beginner though, so that’s mostly an option available to you down the road.

A trader that uses this method of trading will be capable of influencing the price. Whenever they place orders, they are immediately transmitted and the market sees the additional demand for a stock, or the fact that someone is trying to get rid of it. The CFDs price will be influenced by that stock’s evolution.

The ones that should pay most attention to this method and try to use it often would be the traders that do this for a living or at least do it often enough. They allow you to get rid of the middle man, the dealer or the broker. That also means having the ability to get improved prices both when you’re purchasing and when you’re trying to sell. The direct market access is also a good fit for anyone that tries to take advantage of very small changes in price, basically day traders.

Despite the advantages that this method brings, one shouldn’t just jump in without careful consideration. Keep in mind the advantages and disadvantages of this type of trade first. Are you the kind of trader that can take advantage of this type of CFD? Are you experienced enough to use direct market access and at the same time use options to make your potential losses smaller? If you’re not yet experienced enough to make this step, try learning a bit more about the market first and the way it works.

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