Pros and cons of direct market access
Pros of DMA
With DMA, all orders are visible to the entire market, which enables market participants to effectively gauge market liquidity – as the order book of an exchange will show the total number of buyers and sellers.
Also, because all orders are of equal priority in terms of price and time in the order book, DMA creates an equal playing field between different market participants – making it possible to see other trader’s movements and effectively gauge market sentiment.
Finally, since prices are gathered from a wide selection of global banks, stock or currency exchanges and liquidity providers, you can be sure that DMA offers competitive prices.
Cons of DMA
While there are a range of pros, there are also several cons to DMA such as a possibility of increased risk due to its complex nature. This is why it is usually recommended to advanced traders only.
DMA is heavily regulated, which can be a good thing because it ensures that trades are carried out in a responsible way. However, it can also make trading less flexible than over-the-counter (OTC) trades.
It’s also worth noting that DMA prices are not necessarily better than OTC, because many brokers’ pricing technology is designed to find the best available prices on both OTC and DMA markets.
One final thing to be aware of when trading share or forex CFDs via DMA with IG is that because we take a parallel position in the underlying market, once an order has been executed, you cannot change or reverse the position. However, you can still close your position at any time.