Are you looking for another way to trade contract for differences (CFD)? You might want to try trading CFD DMA or Direct Market Access. It’s similar to the share CFDs, but as the name suggests, you’ll have direct access to the market.
Just a quick review, contract for differences (CFD) is a contract between the buyer and the seller wherein they agree that the buyer will be a partial owner of an underlying asset. In terms of profit, the buyer will earn from the difference between the price of the underlying asset at the closing and opening of the trade.
When it comes to trading CFD DMA, you’ll still be signing a contract and becoming a partial owner of the underlying asset, but you also have a real-time update of the market price.
Are you getting more interested? Here are five things you should know about trading CFD DMA!
1. DMA CFD has transparency
As a contract for differences (CFD) trader, you’ll be able to see the actual updates of the asset you’re trading under DMA. Compared to the equity CFD which is when all your transactions will undergo the broker, CFD DMA won’t require you to tell your broker about your plans.
In addition, you can analyse your future bids since you can also see other trades and the market depth of the stocks you’re trading. It’s a great thing to have an idea of other traders’ moves so that you can a strategy based on what you see.
In terms of transparency, when you trade CFD DMA you can see the last amount of the last order made, which is helpful, especially when you day trade.
2. Lots of trading opportunities
Since every trade is visible to the market and you’re trading contract for differences (CFD), there are a lot of trading opportunities under DMA.
Even if you use different strategies, you can still trade any underlying assets of your interest. Furthermore, it allows you to place your orders at any level without additional payments. So instead of paying the broker when placing orders, you can use the money to do it on your own.
3. DMA has a complex structure
Now, if you’re a beginner in trading, it’s not recommended that you jump right to CFD DMA. Instead, it’s best if you try trading contract for differences (CFD) with the broker’s help first, before doing things on your own.
DMA has a complex structure. It may seem easy, but it’s built for professional traders, and not for beginners. If you skip the basics and go right through it, you may increase the risk of losing money.
Even if you search online, there are no articles that will tell you, a beginner, to try CFD DMA instead of equity CFD.
4. There’s an increased liquidity
When trading the traditional contract for differences (CFD), your profit will just be based on the price agreed upon in the contract. Meanwhile, in CFD DMA, you can see the cost of an underlying asset in the market.
There’s a considerable portion of trades can be made daily, but the good news is that you can trade both in the opening and closing phases of auctions. Auctions are important in trading because they’re when liquidity becomes higher, and it’s a good thing that DMA traders are allowed to participate in them. Unfortunately, even if auctions are happening, there’s still a possibility to lose.
5. Pricing is competitive
Since you’ll be able to see the price of the underlying asset in the market, you might panic when a lot is going on. As mentioned in the traditional CFD, there’s a price agreed upon in the contract.
On the other hand, CFD DMA enables you to see the real-time prices of different assets. In this case, there’s a wide selection of assets you can trade. Trading CFD DMA can be overwhelming at first, but you’ll get used to it.
When you’re usually updated on the market pricing, you can calculate your strategy for the next trading days. In addition, your ability in assessing the market liquidity will improve.
Nowadays, you can find a lot of brokers that offer CFD DMA. To maintain a DMA trading platform, they need to maintain a top-notch infrastructure and updated technology. Otherwise, they won’t be able to sustain the platform.
If you’re not yet prepared to trade CFD DMA right away, you can always try the free demo. It’s easy to find platforms that offer free trials. Also, you can find out if the platform is good enough for your trading needs. It’s like you’re hitting two birds with one stone.
Once you’re ready, you can start trading at your phase. Don’t forget to share your CFD DMA trading experience by leaving a comment below!
ABOUT THE AUTHOR:
Aliana Baraquio is a web content writer at FP MARKETS, a global Financial Technology services Foreign Exchange (Forex) and Contracts for Differences (CFD) broker established in 2005. She also loves reading about interior design and home makeovers.