Aug 9 2010
Resolving which CFD broker is best comes down to asking the best possible questions to determine your CFD trading needs. Now we are planning to look at the most vital questions to assure your CFD broker is exactly for you.
Asking the right questions comes down to being certain you are clear on your objectives when it comes to trading
DMA CFDs. To help determine your objectives here are a some questions you may want to pay attention to before selecting the best CFD broker.
1. What products are you searching to trade?
Resolving on which financial instruments you are planning to trade is vital before jumping on board with a CFD broker. Most traders beginning with Contracts for Difference begin by selling their local stock market. As a result a lot of CFD broker will do this way. If however you wish to trade a rate of foreign exchange indices and sectors then your selection of CFD brokers will cease down. As a common rule the only CFD broker that enables you to trade multiple exchanges around the world are market-makers.
2. Straight Market Access or Market maker?
Choosing between direct market access and a market-maker should not be hard. If you have a desire to trade the local exchange with the biggest level of transparency, never get re-quotes, participate in opening and closing ways and see your orders in the market depth, then the Direct Market Access (DMA) model is suitable for you.
If your preference is to get an access all the world's markets via the one account including foreign exchange, indices and commodities and transparency in market depth is not your main preference and you sell small parcel sizes then a market-maker is able to become the best option for you.
3. Do you get access to support?
When beginning on any new enterprise getting the needed support is absolutely vital. When it comes to trading Contracts for Difference, client support from a technical point of view as well as dealing support is absolutely essential. Always ensure your
CFD broker has 24 hour support and an appropriate supply of free online training tools for you to gain confidence in the system.
4. Is the Trading Platform easy-to-use?
Modern technology plays an essential part in the Inrenet world and it is now general practice for a CFD broker to suggest a live
webiress demo account.
By asking these four easy questions you will assure you find the best CFD broker to your trading needs.
Aug 8 2010
Direct Market Access CFDs or DMA CFDs are probably one of the most transparent different types of CFDs available. DMA CFDs have the advantage of enabling participation in the underlying market of the stock over which the Contract for difference is quoted. DMA CFDs are fairly new and have only become popular in Australia over the last few years however, they continue to become prevalent as traders realize the transparency obtainable by this sort of CFD.
DMA CFDs have major advantages over the more usual over-the-counter (OTC) variety in that they allow the trader to take part in the opening and closing phases of the market. Having the ability to buy and sell in these phases of the market offer significant advantages to traders as they can obtain the opening or closing price of the day. Traditional over-the-counter CFDs don't allow the trader to take part 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 take part in the opening and closing phase of the market, over-the-counter CFDs do have the benefit of allowing the trader to buy or sell volumes that may not be accessible in the underlying market during normal trading hours.
DMA CFDs have become accepted 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 permitting active traders to exploit fairly small price changes. Using DMA CFDs also permits 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 drawbacks of DMA CFDs is that by and large DMA CFD companies don't offer guaranteed stop loss orders. Guaranteed stop loss orders have the advantage of enabling the trader to manage their downside risk. Slippage often occurs when using stop-loss orders, guaranteed stop-loss orders remove this risk altogether.
It's important to be aware that prior to opening a CFD account you must remember that when trading DMA CFDs you'll required to deposit a larger initial margin amount than the over-the-counter (OTC) kind. In combination with higher margins many DMA CFD providers will not be able to offer you CFDs over indices and currency contracts due to these contracts being over-the-counter in their very nature.
There are relatively few platforms available offering DMA CFDs, probably the most popular platforms in the Australian market is
webiress. WebIRESS provides the speed and reliability day traders and scalpers need as well as a variety of different order types including trailing stop-loss orders. Another popular platform is ProDeal, ProDeal offers all of the benefits webIRESS offers with the additional benefit of being able to trade over-the-counter CFDs through the same platform allowing traders to trade CFDs on indices and forex from their DMA CFD account.
It is essential that before making the commitment to begin trading
DMA CFDs you recognize the risks associated with the product. Like all geared products trading CFDs offers large rewards however there are also risks involved that if not managed properly can lead to losses larger than the investors initial deposit.
Before choosing a DMA CFD provider you must ensure that you trial their demonstration platform and read their Product Disclosure Statement which outlines in detail the fees and charges, gives trading examples, and outlines the varieties of CFDs offered together with the risks and benefits of trading
CFDs. You need to ensure that the CFD provider you pick is able to give you the platform and products that fit your trading strategy.
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