Articles of Interest

Direct Market Access CFDs or DMA CFDs are one of the most transparent types of CFDs available. DMA CFDs have the advantage of allowing participation in the underlying market of the stock over which the CFD is quoted. DMA CFDs are relatively new and have only become popular in Australia over the last few years however, continue to become popular as traders realize the transparency offered by this type of CFD. 
 
DMA CFDs have significant advantages over the more traditional over-the-counter (OTC) variety in that they allow the trader to participate in the opening and closing phases of the market. Being able to trade in these phases of the market offer significant advantages to traders as they are 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 receive some of the best prices of the trading day.

Despite the drawback 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 normal trading hours.

DMA CFDs have become popular amongst day traders and scalpers. The main reason for their popularity is because DMA CFD providers allow CFD trades to flow onto the underlying market in the stock on which the CFD is based allowing active traders to take advantage of relatively small price movements. 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 generally DMA CFD providers do not offer guaranteed stop loss orders. Guaranteed stop loss orders have the benefit of allowing the trader to manage their downside risk. Slippage often occurs when using stop-loss orders, guaranteed stop-loss orders remove this risk altogether.

It is important to be aware that prior to opening a CFD account with you should be aware that when trading DMA CFDs you will required to deposit a higher initial margin amount than the over-the-counter (OTC) variety. In addition to higher margins many DMA CFD providers will not able to offer you CFDs over indices and foreign exchange contracts due to these contracts being over-the-counter in their very nature.

There are relatively few platforms available that offer DMA CFDs, one of the most common platforms in the Australian market is webIRESS. WebIRESS offers 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 of the advantages webIRESS offers with the additional benefit of being able 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 is important that before making the commitment to start trading DMA CFDs that you understand the risks associated with the product. Like all leveraged products trading CFDs can offer substantial rewards however there are also risks involved that if not managed correctly can lead to losses greater than the trader’s initial deposit.

Before choosing a DMA CFD provider you should ensure that to trail their demo platform and read their Product Disclosure Statement which outlines in detail the fees and charges, provides trading examples, and outlines the types of CFDs offered along with the risks and benefits of trading CFDs. You should ensure that the CFD provider you choose is able to offer you the platform and products that suit your trading strategy.

To find out more about DMA CFDs download our free guide.

Direct Market Access or DMA is the often used to describe a variety of CFDs that have become popular in the Australia market, these are affectionately known as DMA CFDs. With DMA CFDs your trade is passed directly through to the underlying share market with no dealer or market maker intervention, this means that orders are executed at the true market price and in a timely manner with no re-quotes. Trading DMA CFDs is much like trading shares online.

DMA CFDs provide complete order transparency. Traders are also able to participate in the market depth of the underlying security on which the CFD is based by joining a bid or offer queue, they are also able to participate in the open and closing auction phases of the market. DMA CFDs provide all of the benefits of trading shares with the additional leverage that CFDs offer.

Trading DMA CFDs is very similar to trading shares, traders are able to hit the bid or offer or join the buy or sell queue. DMA CFD traders have significant advantages over traders using market made CFDs in that they have the potential to enter and exit trades at superior prices.

When trading DMA CFDs you will be required to subscribe to exchange data, the cost of data varies from exchange to exchange. Once subscribed you will 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 participate in order queues allowing partial fills and superior execution.

One disadvantage of DMA CFDs is that guaranteed stop losses are not offered, typically DMA CFDs traders use options to manage their downside risk however these can be overly complicated for the novice trader.  

When trading DMA CFDs traders have the ability to become price makers meaning that when an order is placed it is transmitted to the real market and can have an effect on the price of the stock over which the CFD is based.

Trading CFDs using a Direct Market Access (DMA) model is best suited for frequent traders that trade on an intraday basis. Frequent traders will find that DMA CFDs will enable them to trade 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 profit 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 which they are trading. The webIRESS platform is also very popular within the share trading community, mainly because of the variety of order types on offer, whereas ProDeal is very popular amongst CFD traders, this is because of the broad range of CFD on offer and its advanced charting functionality.

It is important to note that before starting to trade DMA CFDs you consider whether this type of CFD suits your trading style, choosing the wrong CFD type will have an effect on the success of your trading strategy.

You can find out more about DMA CFDs in our FREE CFD guide.

DMA CFD day traders constantly look for short term trades to take advantage of small market movements on the other hand investors look for medium to long term value. All traders and investors need a strategy even the best day traders and fund managers, here we will examine some of the principles adopted by the best of them.

A DMA CFD trade can last anything from half an hour for short term intraday scalping or even up to four or seven days. You must never let a short term CFD trade to turn into a long term position if it goes against you. You must stick to your original trade parameters. If you don’t, your losses will start to accumulate and you run the risk of wiping out your account. If you have chosen to open a DMA CFD position that you want to run for several days the same rule applies. Don’t let it become an investment that sits on the back burner hoping it will come good.

You should only be holding DMA CFD positions overnight if you are confident in your view, not because you can’t bring yourself to take a loss. This is one of the most common mistakes made by novice traders. As the market close approaches and their positions start moving against them, a lot of traders refuse to accept that their trades were wrong. This leads to unnecessary risk taking and generally ruins the next day’s trading.

When the market starts to turn or go into consolidation phase, good day traders can take long and short positions several times during the trading day. This is only possible if you are flexible and are not looking for big price swings, you must also be prepared to take small loses and move on to the next trade.

The essence of day trading is flexibility. You must be able to bend with the market. Do not take it on. As soon as you have a strong fixed view on where a given price of the CFD is heading you must put stops in place as this is where you can suffer the biggest losses because when the market moves against you all you want to do is increase the size of your position.

On the longer slightly longer term DMA CFD trades i.e. one to seven day duration, you must be looking for at least a profit of 1% and ideally up to 5% to justify your risk exposure. This does not mean you should run a 5% stop loss. If at any point the trade looks incorrect close it out and look for more favourable conditions to re-enter.

Stop loss orders are absolutely vital to your capital survival and your ability to keep day trading. They should be viewed as an insurance policy. Stop losses have been vastly under utilised by DMA CFD traders in the past who were always worried about being stopped only to see their trades go the right direction later on. This will happen, but you must be able to deal with the frustration and move on to the next opportunity. If you don’t, you have adopted an incorrect trading style and will find yourself at the market’s whim.

Trading versus Investing
The difference between trading and investing is the time horizon and expectations. Investing is a long term game that involves committing your money to the market looking for positive capital growth and/or income. Investors look to put their money into the markets for a minimum of at least 10 years. Investors should not look at their CFD portfolio on a day to day basis as this will only affect their overall view of the market as the inevitable large swings would unnerve them.

Warren Buffett said you should not buy a stock if you are concerned it may drop in value by 50 per cent. This is an extreme view, but Buffett is one of the world’s richest men and most successful investors.

One of the problems with long term investing in CFDs is money management and where to put your stop losses. An intraday move could go below your perceived level of an acceptable drawdown, but you have to remember that you are investing for the long term. It requires immense patience to be a long term investor and this style only suits certain people. This why there are many fund managers who look after the money of people who do not have the time or the ability to get involved in the financial markets. Long term investing should be used as part of an overall strategy.

Risk
Risk is always present in the markets. Your trading strategy must address risk management. How much of your capital do you want to risk at any given time?

You must always be looking to reduce risk and this can be done by using stop loss orders. This is particularly important if you are going to use DMA CFDs with low margin requirements where the leverage can be high. You should also ensure that your portfolio is well diversifies and includes DMA CFDs from different industry sectors, this will ensure that you are not solely exposed to the price movement of one CFD.

CFDs can be enormously rewarding if you adopt strict trading rules and are disciplined. Before trading CFDs on line you must ensure that you read our free CFD trading guide.

webIRESS is a financial information and trading platfrom that provides users with dynamic, real-time market data and trading functionality for CFDs, forex and equities. webIRESS combines the advanced features of its big brother the IRESS information solution with the added benefit of trading, advanced order types and multi product portfolio management.

Who uses webIRESS?
webIRESS is very popular amongst professional traders and investors and small broking firms who:
•   want a reliable low maintenance trading platform
•   want accurate and timely market data and news
•   want real time high speed execution
•   want advanced charting and order types

What features does webIRESS offer?
webIRESS is based on the same technological backbone as the IRESS platform the only difference being rather than being a downloadable application webIRESS is java based and can be accessed using an Internet browser. webIRESS can be accessed through the login portal on your brokers website. Most brokers also offer a webIRESS demo for prospective clients, this allows them to trial the platform and test it’s functionality.

The main features of the webIRESS platform are:
•   Browser based CFD and equity information
•   Direct market access (DMA) and complete order management capabilities
•   Advanced order types including stop loss and trailing stop orders
•   Comprehensive news and market data, including detailed security information
•   Sophisticated market monitoring tools including a market map
•   Comprehensive market analysis and charting
•   News and trade sensitive alerts 
•   Excel plug-in for data extraction

The quote and watchlist functionality within webIRESS displays real-time dynamic quotes for CFDs, stocks and indices. Users can create and maintain their own custom watchlists or use existing watchlists built into the webIRESS trading platform. Real time market prices can be monitored using the quote ticker, which displays live trade prices for securities in a watchlist or for all the securities on an exchange.

What exchanges can I trade Direct Market Access (DMA) CFDs on?
webIRESS allows you to trade Direct Market Access (DMA) CFDs on 17 different equity exchanges. You can trade on real time data using the advanced order types available in webIRESS in addition to the orders types supported by the 17 exchanges on which direct market access (DMA) CFDs are offered.

The exchanges which you can trade Direct Market Access (DMA) CFDs on are:
•   ASX: Australian Stock Exchange
•   NZSX: New Zealand Stock Exchange
•   LSE: London Stock Exchange
•   SES: Singapore Stock Exchange
•   KLSE: Malaysian Stock Exchange
•   TSE: Tokyo Stock Exchange
•   HKSE: Hong Kong Stock Exchange
•   TWSE: Taiwan Stock Exchange
•   KSE: Korean Stock Exchange
•   OSE: Osaka Stock Exchange
•   OJ: Osaka Hercules
•   NYSE: New York Stock Exchange
•   NASDAQ: Nasdaq
•   DAX: Deutshe Borse
•   SIX: Swiss Exchange
•   Borsa Italiana
•   Euronext Paris

webIRESS provides you with market depth, a list of all current bids and offers and the last 20 trades for the current day for all of the exchanges listed above. Course of sales data is available for the last 60 days and the current day.

What market news is available on the webIRESS trading platform?
News is offered from a wide range of news vendors who provide detailed company information in addition to global market wraps and economic announcements.

News from the following vendors is available to you directly within the webIRESS trading platform:
•   ASX Signal G Company News: company announcements made to the ASX transcribed into text format
•   Reuters News
•   AAP News: domestic financial, economic and other news
•   Dow Jones Australia/New Zealand news
•   Dow Jones International news
•   Ralph Wragg

What Security and Market Information can webIRESS provide?
Security details such as company financial data, dividend and capital adjustment histories and business profiles are provided on the webIRESS platform to ensure all webIRESS users have the most recent and up to date information to aid in their decision making.

The Market Activity and Market Map functions within webIRESS provide users with a the ability to obtain a quick market and sector overview with the touch of a button. The Market Activity lists all of the top movers in the total market and the major market segments. The Market Map is a visual representation of the market performance of the securities in an industry group, for the current day.

Indices and economic indicators available within the webIRESS trading platform include:
•   major international interest rates
•   major international indices
•   foreign exchange rates
•   commodities prices

Using webIRESS to trade CFDs
CFD trading on webIRESS can be easily enabled by your broker if they have an IRESS order routing system (IOS) that that is configured to allow direct market access (DMA) CFD trading.

Charts on webIRESS
webIRESS includes a range of chart indicators and trend lines for simple analysis of price charts. webIRESS can provide access to over 20 years of historical pricing data allowing users to perform detailed back testing.

Can I customize my webIRESS layout?
Traders can configure the webIRESS workspace layout to suit their own preferences. They can also create custom keys for frequently repeated tasks and save all personal settings for future use.

WebIRESS Excel Interface
The webIRESS excel interface enables the creation of live price links between webIRESS and Excel, or the direct extraction of historical data into an Excel spreadsheet.
 
How do I get started trading CFDs on webIRESS?
There are many brokers that offer the webIRESS trading platform however before getting started on the webIRESS platform you should download a webIRESS demo and read our guide to CFD trading.

There are two main types of CFDs, these are:
 
1.     Direct Markets Access and;
2.     Market Made
 
Some CFD providers only offer one type of CFD others offer both. The most common type of CFD is the market made variety, typically this type of CFD is offered by CFD providers that also offer spread betting and originate in the United Kingdom where spread betting is popular.

All CFD traders or potential CFD traders should understand the differences between the mechanics of both types of CFDs and the fee structures associated with them.

Direct Market Access (DMA) CFDs
Direct Market Access (DMA) CFDs mirror the price and liquidity of the underlying instrument on which the CFD is based. DMA CFDs are the most fair and transparent type of CFD available. When trading DMA CFDs the trader is a "price maker". DMA CFD traders can enter and see an equal order flow onto the underlying exchange, this guarantees that at all times they receive true market prices on every trade. DMA CFDs offer traders real time execution, guaranteed market prices and participation in the order book and opening and closing phases of the market this provides a significant advantage for scalpers.
 
DMA CFD providers do not profit directly from performance of the CFD trader, as all CFD positions are 100% hedged. This means that if you buy the CFD, the provider will instantly buy the underlying equity as their hedge trade.
 
Points to note
•The quoted price of DMA CFDs is the same as the price quoted on the underlying exchange;
•DMA CFD orders flow directly onto the underlying exchange;
•DMA CFD traders can be a price takers or makers and participate in the market depth on the exchange, and;
•DMA CFD traders can participate in opening and closing market auctions.

Market Maker (MM) CFDs
A Market Made CFD does not mirror the price on the underlying market. Market Makers that offer Market Made CFDs derive their CFD prices from the underlying instrument on which the CFD is based rather than quoting the exact exchange price of the instrument like DMA CFD providers. Market Makers act as an intermediary to the CFD trade and have the ability to alter the price of the CFD, price alterations often occur in their favor, often resulting in stop orders being triggered and slippage which can add a significant cost to the trade.
 
Market Makers do not hedge 100% of their CFD positions, typically they hedge only the resulting amount after their clients long and short positions net each other off, however in many cases they do not hedge at all and often directly profit from their client’s losses. When trading Market Made CFDs trades do not flow directly onto the exchange, they are at the discretion of a dealer as a result orders are filled slower and at inferior prices.
 
Points to note
•MM CFD traders do not receive the same prices as those quoted on the exchange;
•MM CFD spreads are often widened and orders re-quoted;
•Market Makers are price takers not price makers, this means MM CFD traders cannot participate in the underlying order book;
•MM CFD traders cannot participate in the opening and closing market auctions and;
•Some Market Makers profit from the performance of their clients positions.
 
Market Made CFDs do have some benefits over DMA CFDs in that they are generally offered over a larger range of stocks and indices. Market Makers are also able to offer additionally liquidity in larger stocks, the reason for this is because they have positions on their internal order book which they would like to clear. 
 
Market Makers often re-quote clients when they attempt to buy or sell a CFDs, re-quotes occur as a result of the Market Marker adjusting their internal order book to compensate for a lack of liquidity at a particular price level on the underlying exchange.

So which type of CFD should you choose:
When comparing the two types of CFDs you should consider whether you’re trading style and the instruments that you trade suit either a Market Made or Direct Market Access model. Typically scalpers and active traders choose DMA CFDs over MM CFDs as there are no re-quotes and the trader can be a “price maker” through participating in the underlying order book of the stock which they are trading. Market Made CFDs are popular with longer term traders and those that prefer to trade indices and forex. The reason for this is than often Market Markers offer both indices and forex commission free. Often DMA CFD providers do not offer indices and forex on a DMA basis as by their very nature they are a market made product and cannot be traded on an exchange.
 
Before choosing a CFD provider you should analyse your trading strategy and choose the type of CFD that suits you best. If you are unsure of your trading strategy or would like save the hastle of having multiple CFDs account with multiple providers you should choose a CFD provider that is able to offer you both Market Made CFDs and DMA CFDs.

Other types of CFDs
It is also worth noting that there is a third type of CFD, these are exchange traded or ASX CFDs and are offered by the Australian Stock Exchange. ASX CFDs are not popular amongst traders or investors due to their lack of liquidity and wide spreads. ASX CFDs are only offered over a small range of securities, indices and foreign exchange pairs. ASX CFDs do have the benefit of being cleared and traded on an exchange however as there are no significant advantages of this type of CFD traders prefer either the Market Made or Direct Markets Access CFDs. 

With IC Markets you can trade either Market Made CFDs or Direct Market Acess CFDs. IC Markets understand traders have varying styles and strategies that suit each type of CFD. 

To find out more about CFD trading you can download our guide on DMA CFDs for free.