For beginners, it is important to know the basic kinds of market that you can access to start your trades. Essentially, there are two styles of dealing models in which CFD traders name themselves: direct market access (DMA) and market maker. There is also exchange trader, straight through pricing, straight through processing (STP), and hybrid DMA.
Initially, an investor can set up a contract for difference using any of the dealing models. In direct market access, everything is transparent — from pricing to trading. Both the investor and trader have full knowledge of the market and trading conditions. It allows CFD traders to have a full view and interaction with the books of global equity exchanges by submitting buy or sell orders directly. In the past, financial institution giants were the only benefactors of direct market access. However, the CFD trading industry had undergone a complete revolution and rapid improvements in its systems and technology, allowing small and medium retail investors to benefit from DMA. This system has also enabled private firms and other investors to have direct interaction with the order book.
The term market maker possesses different meanings in the business world. In CFD trading, a market maker is a market participant or member of a certain exchange firm that buys and sells securities and other assets at the price displayed in its exchange trading system for customer accounts. The act of buying or selling for its own accounts is the principal trade, while for customer accounts it is referred to as agency trades. The market makers have the power to enter and adjust quotas to buy, sell, enter, execute, and clear orders and transactions.
One of the most common types of market makers is a brokerage house. This establishment offers marketing strategies and solutions for both investors and sellers.
Market makers often make a market by taking risks and willingly buying or selling assets of a group of companies to broker and dealer firms that are certified members of their exchange. It is basically a gamble between trades and this style of dealing is not recommended for beginners.
Brokers are certified professionals that can be your guide to success or failure. The industry has seen a lot of success and failures brought about by unorganized strategies and inexperienced brokers. Thus, having an in-depth knowledge of the market and fitting your lifestyle to your chosen dealing model is essential to guarantee success.