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Direct Market Access or DMA is the term often used to explain a type of CFD which has become prevalent within the Australian market, these are often called DMA CFDs. With DMA CFDs your deal is passed directly through to the underlying stock market without dealer or market maker involvement, this means that orders are executed at the real market price in a timely manner without re-quotes. Trading DMA CFDs is much like buying and selling shares over the internet.
DMA CFDs offer absolute order transparency. Traders are able to participate in the market depth of the underlying security over which the CFD is quoted by joining a bid or offer queue and also the open and closing auction phases of the market. DMA CFDs offer all the benefits of buying and selling shares with the added leverage that CFDs offer.
Buying and selling DMA CFDs is very similar to buying and selling shares, traders are able to hit the bid or offer or join the buy or sell queue. DMA CFD traders have major advantages over traders using market made CFDs in that they have got the potential to enter and exit trades at superior prices.
When trading DMA CFDs you’ll be required to subscribe to exchange data, the cost of data varies from exchange to exchange. Once subscribed you’ll have access to real time prices and market depth allowing you to see the number of buyers and sellers at each different price level and take part in order queues enabling partial fills and superior execution.
One drawback of DMA CFDs is that guaranteed stop loss orders are not offered, however these are not always necessary as generally DMA CFDs traders use options to manage their downside risk however these are often overly complicated for the newbie trader.
When trading DMA CFDs traders have the ability to be price makers meaning that as soon as an order is placed it will be transmitted to the real market and can affect the value of the stock on which the Contract for difference is based.
Trading Contracts for difference using a Direct Market Access (DMA) model is best suited to frequent traders that trade on an intra day basis. Frequent traders will find that Direct market access CFDs will enable them to buy and sell freely without dealer intervention and obtain better prices when buying and selling. DMA CFDs are also suited to active day traders and scalpers who are looking to benefit from small price changes quickly.
There are a number of CFD platforms that you can trade DMA share CFDs on, the two most common platforms in Australia are webIRESS and ProDeal. Both platforms allow traders to participate in the market depth of the DMA CFD on which they are trading. The webIRESS platform is also very popular within the share trading community, largely due to diversity of order types on offer, while ProDeal is extremely popular amongst CFD traders, this is because of the broad range of CFDs on offer and its advanced charting functionality.
It’s important to note that before commencing to trade DMA CFDs you consider whether this type of CFD fits your trading style, choosing the incorrect CFD type will affect the success of your trading system.
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