DMA CFD Trading Platforms – Which One Is Best?
Direct Market Access CFDs or DMA CFDs are probably the most transparent forms of CFDs available. DMA CFDs have the advantage of allowing participation in the underlying market of the stock over which the Contract for difference is based. DMA CFDs are rather new and have only become common in Australia during the last few years however, they continue to become prevalent as traders realize the transparency offered by this type of Contract for difference.
DMA CFDs have substantial advantages over the more usual over-the-counter (OTC) kind in that they allow 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 receive the opening or closing price of the day. Traditional over-the-counter CFDs do not permit 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. Despite the disadvantage of not being able to participate 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 prevalent 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 equity on which the CFD is based permitting active traders to take advantage of fairly small price movements. Using DMA CFDs also permits 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 generally DMA CFD companies 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 occurs when using stop-loss orders, guaranteed stop-loss orders remove this risk altogether.
It’s essential to be conscious that before opening a CFD account you ought to bear in mind that when trading DMA CFDs you will required to deposit a larger initial margin amount than the over-the-counter (OTC) type. 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, the most popular platforms in the Australian market is webiress. WebIRESS provides the speed and reliability day traders and scalpers need in addition to a variety of different order types such as trailing stop-loss orders. Another popular platform is ProDeal, ProDeal offers all the benefits 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’s imperative that before making the commitment to begin trading DMA CFDs you realize the risks connected with the product. Like all leveraged products trading CFDs offers large rewards however there can be risks involved that if not managed right can lead to losses larger than the investors initial deposit.
Before picking a DMA CFD provider you should ensure that you test their demo platform and read their Product Disclosure Statement which outlines in detail the fees and charges, gives trading examples, and outlines the sorts of CFDs offered together with the risks and benefits of buying and selling CFDs. You need to make sure that the CFD provider you select is able to give you the platform and products that suit your trading plan.