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Day Trading DMA CFDs

Direct Market Access
Written by Andy
  1. Direct Market Access or DMA is used to describe a type of CFD that is becoming increasingly popular in Europe, often referred to as DMA CFDs. With DMA CFDs your trade order instructions are dealt immediately through to the underlying exchange without any dealer intervention which implies that orders are filled transparently without re-quotes. This is because a direct market access (DMA) provider allows a client to execute trades directly in the underlying market, such as the sharemarket, so all trades are 100 per cent hedged.
  2. With DMA CFDs, traders are able to participate in the market depth of the underlying stock over which the CFD is issued by joining the bid or offer queue as well as the open and closing auction phases of the market. This is because Direct Market Access allows traders to place an order for a share wherever desired, even within the ‘spread’ whereas a trade without DMA can only buy a share at the offer price. In this respect, Direct Market Access CFDs offer all the advantages of buying and selling conventional securities with the added benefit of leverage that comes with margin trading.
  3. When buying and selling DMA CFDs traders are said to be price makers because they have the ability to influence the order book. As soon as orders are input these will be reflected on the exchange and can have an effect on the price of the share over which the CFD is based.
  4. DMA CFD traders have an advantage compared to traders using a market maker for the simple reason that they are able to enter or exit trades at better prices. However, a downside of Direct Market Access CFDs is that guaranteed stop loss orders aren’t possible; some DMA traders make use of options to manage their exposure but these are generally only suited to advanced traders. In addition, DMA trading is only possible for stocks; if you wish to trade forex, indices or commodities you need to make use of a market maker provider. DMA providers thus usually offer a narrower range of products and find it difficult to compete with the wide-ranging offerings of market makers, but are suitable for highly capitalised traders who want to execute their own trades in the underlying market.
  5. When trading via DMA access you are able to subscribe to exchange market data for a nominal monthly fee. Once subscribed you’ll have access to real time quotes and market depth allowing you to check the number of buyers and sellers at each different price level and participate in the order queues enabling partial fills and improved execution.
  6. Trading contracts for difference using a Direct Market Access (DMA) model is best suited for day traders and scalpers that make frequent deals are looking to take advantage of small price changes quickly. This is because day traders need to execute their orders quickly and with no requotes.
  7. There are a number of platforms that allow you to trade DMA share CFDs. These platforms allow traders to participate in the market depth of the DMA CFD instrument on which they are trading.

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