Articles of Interest

ECN is an acronym for Electronic Communications Network. A Forex ECN broker does not have a dealing desk but instead provides a marketplace where multiple market makers, banks and traders can enter in competing bids and offers and have their trades filled by multiple liquidity providers in an anonymous trading environment. The trades are done in the name of the ECN broker, providing you with complete anonymity. A trader might have their buy order filled by liquidity provider "A", and close the same order against liquidity provider "B", or have their trade matched internally by the bid or offer of another trader. The best bid and offer is displayed to the trader along with the market depth which is the combined volume available at each price level. A large number of market participants providing pricing to the ECN broker leads to tighter spreads. ECN brokers typically charge a commission for matching trades between their clients and liquidity providers.

Using an ECN broker to trade forex offers a number of significant advantages, the most apparent being tight spreads and deep liquidity. Tight spreads means that day traders and scalpers can take advantage of small price movements on an intraday basis. Deep liquidity means that large volumes can be traded without having any effect on price this is especially important in volatile market conditions and offers significant advantages for traders using automated forex trading systems. These two factors combined mean that you will be able to take advantage of more trading opportunities, more opportunity equals more profit potential.

There are a number of ECN brokers available in the marketplace today with the most common ECN being Currenex. Currenex is typically used by institutions and investment banks and out of reach for most retail traders, however in recent times as the demand for tight spreads and transparency has improved significantly many commonly know retail trading platforms such as Metatrader have been adapted to suit ECN brokers. Now more than ever the bridge between retail investors and investment banks is narrowing.

Of course using an ECN broker will not be of any advantage if you do not have a trading strategy or plan in place. Formulating a forex trading strategy that takes into consideration your risk profile, lifestyle and capital outlay is essential before you start trading. After formulating your trading strategy you should then try a few forex platform demos to determine which platform best suits your trading strategy. Of course it is important that you choose a forex platform offered by an ECN broker. It can often be difficult to determine and ECN broker, however as a rule of thumb ECN brokers will charge commission on your transaction rather quoting you a widened spread.

To learn more about forex trading using an ECN broker you can download our free FOREX Guide.

WebIRESS is one of the most commonly used CFD and Share trading platforms in Australia, being adopted by some of the country's largest online brokers and leading CFD providers. In recent times webIRESS has undergone a makeover, with the latest version webIRESS Plus recently being launched.

WebIRESS Plus offers day traders and scalpers a number of significant advantages over it's predecessor, with the most noticeable being the speed of order execution, additional advanced order types and visual improvements. The significant improvements of webIRESS Plus make it the ideal CFD trading platform for day traders and scalpers looking to take advantage of rapid CFD price movements in the opening and closing phases of the market and during market volatility.

WebIRESS Plus is fast becoming the most popular CFD trading platform in the market due to the significant edge traders are able to gain as a result of the platforms dramatic speed improvement. In addition to the speed improvements in webIRESS Plus, there are now also a number of new order varieties including if-done orders, meaning CFD traders now have more control over their trades with the ability to set and forget orders.

Despite the significant advantages webIRESS Plus offers day traders and scalpers it is important to note that the speed advantages of webIRESS Plus are dependent on the internet connection being used. As an active trader it is always advisable to ensure that you have the fastest and most reliable internet connection possible, this may mean having an ADSL2 or cable broadband connection. Most active traders will always have two internet connections to ensure redundancy should one connection fail.

Active day traders often use the webIRESS Plus platform alongside an advanced charting package or market scanning tool. One of the more common and readily available charting packages is MetaStock another lesser known package is Spark. Spark is popular with more active day traders who monitor many CFDs at the same time and require detailed real-time information relating to price and volume changes which when combined with chart formations allow them to identify trading opportunities such as price and volume breakouts.

Of course a great trading platform, charting package and internet connection alone will not make anyone a successful trader. These are simply tools that will give you the edge over other traders in the market. The most important components of trading are information flow and discipline which when combined with a proper trading plan and tools will help you on your way to becoming a successful trader.

Currently webIRESS Plus is only available from IC Markets. You can download a webIRESS demo to see whether the platform suits your needs.

The webIRESS trading platform is one of the most common online share and CFD trading platforms in Australia. WebIRESS is used by most of the major online brokers including, Comsec, Etrade, and Bell Direct, however like all on-line trading platforms some traders might experience technical hiccups when first logging in. Some of the more common technical issues that you might encounter along with simple solutions are outlined below. 

By far the most common technical issue encountered by new webIRESS users is what is known as the “ticking clock error” this is simply and endlessly ticking clock that appears in your browser along with the words “installing software please wait”, however, unfortunately for most the wait is endless. The “ticking clock error” is a common problem with a simple solution, this error occurs because Sun Java 1.4 or better has not been installed. The problem can often be resolved through a quick Java update, or new installation from the Sun Java website. In certain circumstances a recent version of Java may already be installed yet this error still occurs, often this is due to a popup blocker or antivirus software preventing your computer from accessing “webdf.iress.com.au“ and Port 6080 or 80, this can be corrected by allowing your firewall or antivirus program to access “*.iress.com.au” and port 6080 or 80. As a precautionary measure you should always clear your browsers cookies and temporary internet files before making any changes to ensure that your old settings are deleted.

Most webIRESS problems are related to Java or the security settings on your computer, however on occasions problems may arise as a result of your internet connection or LAN firewall settings. Testing connectivity to the webIRESS server is easy and should be done if you are unable to resolve you connection problems through the installation of Java or firewall and antivirus permission changes. A simple telnet connectivity test can be run by following the instructions below:

1. Go to “Start” > Run or open a DOS command window.
2. In the Run dialog box or at the DOS prompt, type: telnet web.iress.com.au 6080
3. Press Enter.

A Telnet window opens with the message “Connecting to web.iress.com.au…”

If the connection is successful, the Telnet message will disappear leaving a flashing block or cursor in the top left corner of the Telnet window.

If a connection cannot be established you should contact your ISP or network administrator as it is likely that ports 6080 or 80 are being blocked by your firewall. 

These are some of the most common webIRESS problems, if after attempting the above solutions you are still unable to resolve your webIRESS connection problem you should contact your broker who will be able to conduct more advanced webIRESS troubleshooting.

You can download a free webIRESS Plus demo to see whether the new webIRESS Plus platform solves many of the technical issues that you may have experienced using webIRESS.

Day traders and scalpers are always looking to gain an edge in the market that will give them a real trading advantage, however most traders often go searching for faster PC's, internet connections or a better charting package, many often overlook the fundamental basics like the trading platform that they are using or the broker that they are dealing with.
 
The most important element in any DMA CFD traders arsenal is their trading platform as this is their connection to the market. May DMA CFD day traders and scalpers assume that their broker has the fastest market connectivity and trading engine behind their platform, however unfortunately in reality there are some brokers that do not have the correct infrastructure to enable sub-second order execution into global exchanges.

As a CFD day trader or scalper it is critical to ensure that your DMA CFD broker has the fastest market connectivity possible. In many cases DMA CFD providers outsource their execution services to their prime broker, although this allows the DMA CFD provider to achieve cost efficiencies it does not always help you as a day trader. In-fact outsourcing CFD execution to a global investment bank may mean that your trades are routed through one of the main regional hubs being London, New York or Hong Kong before they reach the market and appear as a filled order on your trading platform. Some global investment banks do however have localised infrastructure meaning that your orders are not sent around the world before they reach the exchange. When choosing a DMA CFD provider it is important that you ask them whether their orders are routed locally or through their prime brokers global infrastructure as this will have a significant effect on the speed of your order execution.

Aside from good market connectivity the other core element is the trading platform that you use. There are many trading platforms available to retail DMA CFD day traders and scalpers, however by far the most popular is the webIRESS platform. Many CFD providers are able to offer you the webIRESS platform however there are very few providers that are able to offer webIRESS plus. WebIRESS plus is faster than conventional webIRESS and offers split second order execution. 

As a DMA CFD day trader is important to choose a CFD provider that can give you split second order execution allowing you to acheive a CFD trading edge. Of course before you start trading you should evaluate the pro's and con's of each CFD provider and download a few trading platforms to ensure that the CFD provider you select does in fact give you an edge in the market.

To find out more about trading CFDs you should download this free CFD Guide.

The webIRESS trading platform has been available as a share trading platform since 2000, it was only in late 2003 that the platform was adapted to suit CFD trading. The early adopters of the platform led its development and consequently forged a new wave of trader, the DMA CFD trader.

Before webIRESS the only DMA CFD trading platform available was complicated and clunky, the webIRESS trading platform set the new benchmark for DMA CFD trading amongst retail investors in Australia. Recently the DMA CFD offering on the webIRESS trading platform has been extended beyond DMA CFDs on Australian shares to incorporate CFDs over shares listed in the US and on several European exchanges along with forex and indices.

The webIRESS trading platform is web-based meaning it can be accessed from any PC with on-line access and can be utilized from behind a firewall in an office or from an internet cafe. The superior mobility of the platform has made it extremely popular amongst casual and professional traders.

It is not only the mobility of the platform and range of products offered that makes webIRESS so popular but it's also the platforms speed, functionality and ease of use. The webIRESS trading platform is one of the fastest DMA CFD trading platforms available, orders are executed in less than one tenth of a second, much quicker than the majority of other platforms. The platforms speed combined with its vast array of order types including trailing stop-loss orders and contingent orders make it the ideal platform for active traders.

The webIRESS trading platform has a number of great features including a market map and ability the see the entire market depth and course of sales of share CFDs, most platforms limit market depth to five levels and course of sales to the last one hundred trades. The market map is particularly useful as it offers a visible illustration of the shares that are moving within a particular sector and the market capitalization of the share relative to the sector. Traders regularly use the market map as a tool to recognize undervalued shares within a sector.

Since the CFDs traded on the webIRESS platform are DMA all orders are transmitted directly to the exchange order book of the stock over which the CFD is based. Being able to participate in the market of the underlying financial instrument means you can be a price maker and trade in the opening and closing phases. These are normally the phases of the market where a large amount of volume occurs, meaning more trading opportunities.

Before you start using the webIRESS platform you should download a demo that will allow you test many of its great features before you start trading for real.

To learn more about DMA CFD trading on the webIRESS platform you should download a free webIRESS demo.

CFD providers all have very different margin rates some offer margins from 1% others start at 5% but are margin rates really important in a well balanced CFD trading strategy?

CFD providers will vary their margin rates depending on the product over which the CFD is based, for example foreign exchange CFDs are typically offered at around 1% margin, the reason for this is simply because the foreign exchange market is the biggest and most liquid market in the world and the risk of currencies gapping is minimal. On the other hand the margin rates on share CFDs will typically vary between 5% to around 35%, the reason for higher share CFD margin rates is because shares tend to be less liquid than currencies. CFD providers will assess the risk of each share CFD individually and adjust the margin to cover the likelihood of the share gapping in volatile market conditions.

In determining the margin rates on share CFDs, CFD providers will generally look at liquidity of the stock, its market capitalisation and its historical price movements. Based on these three main criteria in addition to a few other factors a margin rate will be determined. It is important to note that some CFD providers may offer CFDs on 100% margin allowing them to provide a greater range of CFDs but providing no real benefit to the client.

Index CFDs offered by many CFD providers are a great way of gaining exposure to the overall market without having to buy futures contracts or a basket of shares. Index CFDs are typically offered on margin rates of 1% to 2%, the margin rate will vary depending on the index being traded. 

So how do CFD margin rates affect you?
Of course the lower the margin rate the better you are able to utilise the money in your CFD trading account thus your return on investment (RIO) will be greater, however as CFDs are leveraged instruments it’s not advisable to utilise the full amount of your deposit as margin, doing so would put you at risk of a margin call or even liquidation.

Typically with a good trading and risk management plan in place most CFD traders will allocate one third of their account balance to meet the margin requirements for their open positions, one third will be allocated to meet the margin requirements on intraday positions or opportunistic trades, the last one third remains on call to meet any additional margin requirements on open positions.

In Conclusion
Yes, CFD margin rates are important however leverage is only one of the many tools in a CFD trader’s arsenal and should be used in conjunction with a proper risk management plan and well balanced portfolio. No matter the amount of leverage you are provided if you do not have a trading strategy in place you will not be a successful trader.

To learn more about CFD margin rates and how to develop a trading plan you can download our free CFD Guide.

WebIRESS is one of the most popular trading platforms for DMA CFDs in Australia and is offered by most of the major on-line brokers. WebIRESS is popular in the share trading community as well as with DMA CFD traders. Traders using WebIRESS are able to trade both shares and DMA CFDs using the same WebIRESS login.

Most CFD and on-line share brokers in Australia are able to offer a WebIRESS demo for prospective traders to download any try prior to opening a real trading account. It is important to note that WebIRESS demo accounts do not allow you to place orders or view your portfolio, the reason for this is that WebIRESS must be connected to an IRESS Order System (IOS) in order to function and place orders, demo accounts are usually not connected to an IOS.

As WebIRESS is a web-based trading platform demo accounts are accessed on-line utilising your web browser, however it is important to note that WebIRESS requires Java to be installed on your PC in order to operate correctly. When first installing WebIRESS you will be prompted to install the most recent version of Java. It is critical that the most recent version be installed as your webIRESS may not function correctly on older versions of Java.

Upon first glance your WebIRESS demo will appear quite basic with the workspace layout being divided into four frames, however when switching to the multiple document interface (MDI) mode you will quickly realise the power of the WebIRESS desktop interface. In the MDI mode you are able to freely move windows across multiple monitors and easily create customisable workspace tabs.

When fist logging into your WebIRESS demo you will find that it will most likely have delayed market prices and only one level of depth, this is normal. After opening a real trading account you will be given the option to subscribe to live data at a cost of around $38.50 for ASX data, upon subscription you will have full access to live market data, course of sales and full market depth.

One of the great features of webIRESS is the market map. The market map is essentially a heat map of the market providing a visual representation of the market movement of stocks in each of the sectors in real-time. The size of the squares in the map represent the market capitalisation of each of the stocks and the shades of red or green provide an illustration of how much the stock has moved up or down. The market map is great for traders looking for a quick snapshot of the movement of stocks in relation to their sector and the overall market.

After you have spent some time navigating the menu items, creating watch lists and customising a layout it is advisable to explore the charting functionality of your WebIRESS demo and become familiar with the chart indicators and layouts and how you can adapt them to suit your trading strategies.

Once you decide whether WebIRESS is the right trading platform it is important to factor its cost into your trading budget, most brokers and CFD providers offer the WebIRESS platform at a cost of somewhere between $55 to $88. When combined with ASX data fees your total monthly cost will come to around $95 to $125. If you are a frequent trader you will likely find that your broker or CFD provider will cover the WebIRESS cost on your behalf, however if you are not a frequent trader it is important for you to determine whether the added features available on the WebIRESS platform are worth paying for as there are many free CFD platforms available that offer similar features.

It is advisable that you download a WebIRESS demo in order to become familiar with its many features and to determine whether trading CFDs on the WebIRESS platform suits your trading strategy. 

If you would like to learn more about DMA CFDs you can download our free CFD Guide.  

There are two main types of CFDs, direct market access (DMA) and market made (MM). The most popular type is the market made variety. The reason for the popularity of market made CFDs is simply because CFD providers offering this type of CFD are also able to offer CFDs over indices and forex pairs.  DMA CFDs are typically more common with traders that are more familiar with share trading for the simple reason that DMA CFDs allow traders to participate in the opening and closing phases of the market and also the order book of the underlying security over which the DMA CFD is based. Both varieties of CFD have their place amongst traders and investors and it is important that you choose the type that suits your trading style.

It is not uncommon for day traders and scalpers to utilise DMA CFDs rather than the market made variety as their orders flow directly onto the exchange and there is no market maker intervention meaning that order execution speed is often quicker with no risk of being re-quoted.  DMA CFDs are also favoured because day traders are able to participate and influence the opening and closing match price. The opening and closing phases of the market are the most liquid and of course liquidly is essential in any effective day trading strategy.

Often day traders also have CFD trading accounts with CFD providers offering the market made variety. The reason for this is because day traders like to monitor the movement of the cash indices, in addition to being able to trade them. Market made index CFDs are a cheap simple alternative to trading the actual futures contract which generally requires a higher upfront margin.

Some CFD providers offer both DMA and market made CFD from the same platform, this is the preferred solution for active day traders as it means that their DMA share CFD positions can be cross margined against their indice and forex CFD positions. Having both DMA and market made CFDs in one account also saves allot of paperwork as only one account needs to be managed, making the preparation of tax returns much easier.

Day traders often use both DMA and market made CFDs in their trading strategy, CFD providers who only offer market made CFDs refer to these traders as snipers as their strategy revolves around taking advantage of price discrepancies between DMA and market made CFDs. Such discrepancies often occur during the opening and closing phases of the market as it is during these phases that there are significant price changes, some of which may not be accurately reflected in the price of the market made CFD.  These pricing inaccuracies can result in arbitrage opportunities for shrewd traders.

It is important to note that each and every trader has their own trading style, some styles are better suited to DMA CFDs and others to the market made variety. Before making the selection between DMA or market made CFDs you should consider your trading style and determine whether the speed and accuracy of DMA CFDs or the versatility of the market made variety is better suited to you.

To find out more about trading CFDs you should download a copy of your free CFD Guide.

Incorporating a proper risk management plan into you CFD trading strategy is the single most important aspect of CFD trading. Risk management involves determining the amount of money that you wish to allocate to each trade to ensure that you are able to continue trading should you sustain a loss on the position.
 
Trading CFDs without a proper risk management strategy can expose you to unnecessary risk. For example, if you allocate a large portion of your trading capital to a trade without a proper risk management strategy, you put all of your trading capital at risk meaning that if you sustain a loss you will no longer be in a position to trade. Losing your entire capital base can force you out of the market and you will not even have the opportunity to recoup your losses.
 
The most common form of risk management is position sizing this is also known as the fixed dollar trade size model. In this example an equal amount of capital is used for each trade.

For example, if you have $100,000 to invest, you need to figure out how much to put into the trade. To figure this out you would simply divide $100,000 by the price of the CFD. If the last traded price of the CFD was $8.50 you would divide this by $100,000 to determine the amount of CFDs you can buy, in this case the number would be 11,764. 

In order to determine the amount of risk involved in the trade you will have to work out how much you can afford to lose if the CFD moves against you and set your stop loss at this point. This is also known as the stop loss distance, which is the distance between the entry and stop loss price.

For example, if your stop loss is $8.00 and entry price was $8.50, this means that your stop loss distance would be $0.50. If you have 10,000 CFDs your risk would be 10,000 multiplied by $0.50 or $5,000. In this case your risk would be $5000, which equates to the amount that you could lose should the trade move against you and you get stopped out. 

It is also important to factor in the cost of commission and any financing charges that you may have been incurred from holding the position overnight.

In the fixed dollar trade size model the number of CFDs that that you buy and sell each time will not always be the same, this is because the stop loss size will vary depending on the risk appetite that you have on the trade.

Another form of risk management is compounding, this means that as your account balance increases, you are able to open larger positions.

For example, if you have a starting balance of $100,000 and you have determined that you can afford to have 10 trades open at any given time. As your account balance grows, you will be able to take on larger trades. This strategy can be used up to a point when your drawdown gets too big for your liking and risk appetite.

It is also important to note that if you are trading a CFD that has liquidity issues, you may get to a point where your trade sizes are too large.

To understand more about CFD trading and how you can manage your risk you can download our free CFD Guide.