Most people don’t know the difference between OTC or over-the-counter CFDs and DMA or direct market access CFDs (DMA CFDs), before I start out it is important to ensure that the differences between both types of CFDs are clearly explained as there are important advantages and disadvantages of each type that all traders should be aware of.
Understanding the difference between the two types of CFDs is relatively easily explained. In essence DMA CFD providers allow all of their clients CFD trades to flow into the underlying order book of the stock over which the CFD is based, this allows DMA CFD traders to participate in the market depth a have their orders partially filled in addition to allowing the trader to be a price maker rather than a price taker, OTC CFD providers on the other hand often match orders against another clients order or their own internal liquidity rather than placing the order in the underlying market. OTC CFD providers have the advantage of being able to offer CFDs over indices and forex and are more suited to traders looking to access multiple asset classes, whereas DMA CFD providers are only able to offer CFDs over shares and are better suited to those looking to trade shares on leverage or CFDs on small cap stocks.
Now that you know the difference between the two types of CFDs on offer it is important to understand the trading platforms available. As CFDs are traded online it is important to ensure that you choose the right trading platform that suits your trading style, the most popular DMA CFD trading platform is webiress plus.
Webiress plus is the fastest and most reliable DMA CFD trading platform on the market today. Webiress plus started out its life as a share trading platform and soon after was adapted for CFDs. The platform in web based and uses java, like all java applications it is important to ensure that you have the latest java version installed on your computer in order to experience the rich functionality of the software.
Webiress plus can be quite daunting for beginner first starting out however once you understand the power of the software it is unlikely that you will use anything else. Configuring your initial layout is often the most difficult part however this is relatively simple if you stick to the basics. Some of the essential features of webiress that you should setup to display permanently on your platform workspace are a watch list, your portfolio, an order pad, a market depth window and of course the market map. Having these features open on your workspace are essential when you first start out and will prevent you from making some common and easily avoidable mistakes like not knowing whether an order has been cancelled or not.
Let’s now take a look at the importance of each of these key webiress plus features.
Watch List Having a watchlist window open is essential when you are trading as is allows you to monitor the CFD positions that you have open in your portfolio and any others that you may be interested in trading. The watchlist list will enable you to monitor prices without the need to have multiple price windows open.
Portfolio The portfolio window is arguably the most important feature in webiress plus as this allows you to monitor the essentials including your free equity, margin requirements, portfolio value as well as both your realised and unrealised profit and loss. From the portfolio window you will also be able to monitor your open positions and see you average price, market to market value and unrealised profit or loss on each individual position.
Order Pad Using the order pad window is critical if you are managing multiple orders, the order pad window allows you to track the status of your orders in the market. After placing an order using webiress plus it is essential to check whether the order has successful reached the market, this can be done using the order pad, it is from here that you will also be able to check for partial fills and confirm the status of order cancelations.
Market Depth Having access to market depth is essential when trading DMA CFDs as this will allow you to see your orders in the underlying order book of the share over which the CFD is based, not only will you be able to see your orders in the depth but you will also be able to determine where support and resistance levels are by simply looking to see the number of buyers or sellers in the market at each price point.
Market Map The market map is one of the unique features of webiress plus, it provides traders with a visual overview of the entire market at a glance. It is common for traders to use the market map feature to help them identify share CFDs who’s prices have either risen or fallen dramatically across the entire market. The market map is also able to display the market capitalisation of stocks meaning traders can quickly filter out stocks in a particular sector which may not meet their trading criteria.
Now that you are familiar with the differences between DMA and OTC CFDs and understand some of the key features of the webiress plus trading platform you are well on your way to trading. Before you start trading DMA CFDs on webiress plus it is important that you practice using the platform, place some orders and set up a trading workspace that suits your trading style. You can get a free webiress plus demo here.
As every CFD trader knows choosing a trade is not always the easiest task there are CFDs on thousands of shares to choose from but which ones do you trade? Most traders follow a particular style of trading and choose their CFDs based on certain criteria such as liquidity and price, however not all traders have a trading plan but rather base their investment on factors such as dividend returns or company valuations. Even if you don’t have a trading strategy there are a few important factors that you should consider when choosing which CFD to trade online, a few of these factors are outlined below.
Seasonality With thousands of share CFDs to choose from one factor most people overlook when they start trading is share CFD price seasonality, this is one of the most obvious factors influencing share CFD prices. If it is summer you should consider CFDs which historically have price moves up during this season or price moves down if you are bearish, examples of seasonal stocks include retailers.
Technical Analysis There are thousands of indicators available with the most common ones being MACD, volume, moving averages, RSI, CCI, stochastics and bollinger bands. Don’t get confused by the many thousands of indicators available, keep it simple in the beginning. Using too many indicators can be confusing and result in mixed signals, you should start by using one or two simple indicators first like MACD and moving averages for example, once you are accustomed with these indicators only then should you start experimenting others. Some of the most successful traders solely rely on technical analysis however when starting out it is advisable not to solely rely on technical analysis alone when making your trading decisions.
Company Fundamentals Most people overlook company fundamentals when choosing a CFD to trade. One of the most important aspects in choosing a share CFD is the company’s balance sheet and profitability, reading over the company’s balance sheet is essential before making medium to long term investment, of course if you intend to engage in short term trades this is less important.
Company Management Company management is something most CFD traders fail to consider. Investing in companies who’s management have a good track record is always a good start. Of course management is more important to consider for medium to long term traders, and less important for short term investors looking to take advantage of short term price fluctuations.
Global Market Conditions It is important to monitor global market conditions as market movements are ultimately dictated by the global economic climate. Currencies, commodity prices and global indices all have an influence on the local stock market and ultimately you CFD positions.
Of course these are just some of the factors CFD traders should consider when entering into a CFD position. Every trader enters into CFD positions using different criteria that suits their risk profile and trading habits, it is always important develop your own trading plan to site your risk profile and lifestyle.
To find out more about CFD trading you should take a look at this free CFD guide.
Let’s face is not everyone is cut out to be a scalper or day trader after all sitting in front of your PC for hours on end watching numbers go up and down can be stressful. For most people day trading is too difficult as it’s a high risk reward job and requires a medium to large capital outlay at the start. The emotion of day trading often gets to novice traders, being able to manage your emotions is what distinguishes good traders from bad. The fact is not everyone can be a day trader.
When looking inside them minds of successful traders there are certain characteristics that always stand out. Some of the most common characteristics are:
Analytical Mind Good day traders have analytical minds and are able conduct quick calculations and think on their feet, they must be able to identify trends and patterns without relying on a fancy chart or computer program.
Confidence All successful day traders are confident, they are decisive, able to think quickly and have no time for uncertainty or self-doubt as this is what often leads to missing some of the best trading opportunities of the day.
Self Belief Self belief goes hand in hand with confidence, you have to believe in your decisions and run with them. If you are indecisive perhaps day trading is not be a suitable career for you.
Discipline All successful day traders need discipline, once you have a plan stick to it. When day trading you can lose money as well as make money, as losses can result in an end to your career you need to manage your risks, know where to set your limits and stop loss orders accordingly. Once you have met your objectives do what you planned don’t let greed or fear take control of you.
Decisiveness Good day traders don’t hesitate, they run with their decision and trade what they think is right, hesitation often results in missing out on good trading opportunities.
Passion Day trading involves being passionate about the market, a good day trader never switches off tracking the market day in and day out following news globally, analysing charts and looking at quote screens. This all has to be processed as quickly as possible, this is of course is what will give a good day trader an edge.
Dealing with Failure You can never expect to win all the time this is a motto every day trader should remember. You will lose on some occasions and win on others however, as long as you ensure that over time you win more than you lose you will always be successful. If you cannot accept losses then day trading is probably not for you as all good day trades will suffer losses at some stage.
Concentration When day trading you will need to quickly analyse allot of data and reports in order to arrive at decisions quickly and act fast, this all happens in real time so you must be able to focus and avoiding all distractions during the trading session.
If this sounds like you then perhaps you should take up a career in day trading and learn more about CFDs in this very informative free CFD guide.
It’s not hard to find blogs and forums where people talk about the benefits of CFDs over shares but have you questioned whether the people actually writing these comparisons are traders who have experience in both financial instruments or are they just paid authors out to promote CFDs. In this quick review we will touch on the differences between both CFDs and shares and highlight the unique aspects of each product that has allowed traders and investors to harness the power of their investment portfolio from the comfort of their own lounge room.
CFDs and shares are very different not only in the way they work but also in how they are traded. One of the fundamental differences is the fact that CFDs are an over the counter or OTC product meaning your transactions are not conducted on an exchange but rather with the CFD provider that you are dealing with. Shares on the other hand are traded on an exchange meaning that you are buying and selling off other people in the market with your stock broker simply acting as a conduit providing you with a gateway to the market.
So now that you know one of the most important fundamental differences between CFDs and shares let’s get into some of the key mechanical differences in detail.
Settlement One of the most apparent differences between both products is the way in which they are settled. When you buy shares on the stock exchange you don’t have to pay for the share for three days, conversely when you sell shares you do not receive any money for three days. The transaction day plus 3 days or T+3 is the settlement period set by the clearing house not the broker. Of course when trading CFDs there is no clearing house involved as the transaction is OTC this means the your CFD provider essentially sets the rules, as CFD providers typically do not want to wear the risk of having the settlement of a transaction fail they will ask for the money upfront, this concept of same day settlement is known as T+1. It’s worth noting that some online share brokers also apply T+1 settlement to minimise the risk of settlement failure.
There really is no real advantage of T+1 or T+3 settlement as ultimately the net effect is the same, however most active traders prefer same day settlement for the simple reason that it makes their cash flow easier to manage.
Leverage Unquestionably the most important and apparent difference between CFDs and Shares is the concept of leverage. By the very nature of the instrument CFDs are leveraged meaning that for a relatively small outlay you can obtain a relatively large exposure to a share. Typically the margin rate on most CFDs is around 10% this means that with a margin of $1,000 you could potentially gain $10,000 exposure to the price movement of a share. If you were to buy $10,000 worth of shares you would have to outlay the full amount, rather than the $1,000 required to open your CFD position, providing a more efficient use of capital and return on your initial investment.
It is important to be aware that although leverage can work in your favour, it can also work against you, this means that your profits and your losses are amplified however you can also potentially loose more than your account balance. With share trading on the other hand you cannot lose more than the amount paid, however you profit potential is also reduced.
Short Selling Equally CFDs and shares can be short sold although the process is often easier with CFDs for the simple reason that short sell transactions can be done online rather than over the telephone. The main reason why short selling shares directly is not a simple process is due to short sale reporting requirements which must be disclosed via tagging short trades executed on the exchange. Although CFD providers also have short sale disclosure requirements to meet they are not required to tag short trades for the simple reason that they often pre borrowed stock to cover any short sales, essentially this means that they have covered their clients short positions before the client even places the trade.
Costs of Trading A common myth in the market is that CFDs are cheaper to trade than shares, however this is not always the case. Financing plays an important part in CFD trading however most traders often forget about this. Without conducting any mathematical calculations as a rule of thumb an AUD $100,000 position will cost you around $25 per night in financing, on this basis if you hold a position open for at least 5 days this is the equivalent on paying $125 in brokerage or 12.5 basis points. Of course if you don’t have the capital it may be worth paying this however if the margin of the CFD is high you should think twice as CFD financing is not calculated on the borrowed amount but rather on the full notional value of the position as such it may be more economical to pay for your position outright and pay a higher upfront brokerage cost.
CFDs can of course be a cost efficient trading tool but this is only when positions are held open for a relatively short period of time however, share positions on the other hand can be held open for as long as you like with only the initial transaction cost payable, this is an important difference to keep in mind.
Despite having to pay financing costs one of the benefits of CFDs is that you are not required to pay any GST on your commission, although a relatively small amount it is worth considering the impact of GST on your trading costs if you are an active trader.
Unrealised Profits As CFDs are marked to market on a daily basis your profits or losses are also debited or credited from your account daily this is very different to trading shares where profits or losses are only realised at the time of sale. In this regard one of the benefits of CFDs is that you can utilise your unrealised profits without having to close your positions, naturally there is also a downside to this in that your losses are realised on a daily basis meaning that unlike share trading the free equity in your account may decline without you closing positions.
Only five differences have been touched upon in this article, in later articles we will cover some additional differences between shares and CFDs. In the meantime if you would like to find out more interesting information about share and CFD trading you can download our free CFD guide.
CFD trading is a relatively new concept to most traders and investors in Australia, which is understandable given the mechanics of CFDs are different to traditional share trading. Having an advisor or trading mentor who is able to explain the concept of CFDs and assist you to identify trading opportunities is often a relatively safe way for new CFD traders to gain exposure to financial markets.
There are many stockbrokers and financial advisors in Australia who are able to help traders and investors looking to enter the stock market, however very few have an in-depth experience and understanding of CFDs and how they can be used not only as a hedging tool over a share portfolio but also as a great way to gain exposure to global stocks, commodities, indices and forex pairs.
Some CFD providers are able to provide you with basic CFD trading advice and education however many of them will not provide you with CFD trading recommendations. There are however some CFD providers who are able to provide you with advice and trading recommendations, it is these providers that often also specialise in other aspects of money management including financial planning, corporate advisory and funds management. Dealing with a CFD provider that does not solely specialise in CFD trading is often a good idea for novice traders looking for some assistance in managing their trading portfolio and understanding the risks and benefits CFDs.
Dealing with CFD providers who offer an extensive range of products and services aside from solely offering an online trading platform has a number of advantages in that often you will be assigned a personal account manager with whom you can liaise on a daily basis and ask questions. If you require additional services such as being contacted in the event of a trading idea you can also elect this, however you may be charged a higher commission rate when using this service. Often added benefits such as being able to participate in highly sought after placements and IPO’s will also be provided.
In many cases getting CFD trading advice from your stock broker or CFD provider will cost more than trading for yourself online, however the added commission charges are relatively insignificant when you consider the benefits and are far cheaper than the looses that many novice traders incur when placing trades without a well thought out trading plan or strategy.
Before trading CFDs either online yourself or with a CFD provider who is able to provide you with CFD trading advice it is essential that you understand not only the benefits of CFD trading but also the risks. Often newbie CFD traders fail to understand that although the leverage associated with CFD trading can result in gains it can also result in large losses, this is why having an understanding of risk management is important.
To learn more about CFD trading it is advisable that you read this free CFD 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.
CFD trading can be lucrative for those traders with a proper trading and risk management strategy in place however like any new venture learning the ropes can be difficult. CFD trading requires skill and knowledge of financial markets in addition to a proper trading plan. The unfortunate fact is that many novice CFD traders fail, failure is often caused by a lack of discipline and knowledge of financial markets.
Good CFD education can fast track the learning process that any new CFD trader should undergo prior to starting out. Free CFD seminars are always a good starting point as most CFD seminars cover the basics of CFD trading which can help novice traders understand the essentials, paving the way for the development of a trading plan to suit their lifestyle and risk profile.
Of course most free CFD seminars will only cover the basic elements of CFD trading. It is always recommended to enrol in a paid education course designed especially for CFD traders if more advanced knowledge is required. There are many paid CFD trading courses available which can help prospective CFD traders build a good understanding of the product itself, formulate a trading plan and learn proper risk management strategies.
The CFD trading courses available are all very different some are more advanced than others this is why it is important to choose a course that covers the key elements of CFD trading. Below are four essential elements that a good CFD trading course should cover:
1. How CFDs can be used within you overall wealth management strategy.
2. Risk management and how to incorporate it into a trading plan.
3. How to develop a trading plan to suit your lifestyle.
4. How to properly develop a money management plan.
Of course these elements are very broad and should only be used as a guide when choosing a suitable CFD trading course.
Attending CFD seminars and paid educational courses will help you with the theoretical component of your trading education however theory is only of value when it is applied in practice. The providers of some paid CFD educational courses will also offer you mentoring and coaching services, this is an essential competent in the educational process as more often than not the biggest and most expensive mistakes will be made in your first month of trading. Having a trading coach when you first start out will help you gain confidence before going out on your own.
After the first few trades you will begin to realise the power of CFDs and how can use them in your trading strategy, of course trading CFDs also comes with risks which if not managed correctly though a disciplined risk management plan can result in losses, this is why good CFD education is essential.
To learn more about CFD trading you can download our 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.