Direct Access Trading – The Professional Choice
Most entry level traders would hire online brokers to handle their day trading tasks. Online brokers is relatively cheaper and within anyone’s reach All you need is a credit card and an internet connection to hire online brokers The major disadvantage of online brokerage is the fact that it promotes slow order execution Speed is important in trading. A trader should have a system that can order and place trades on the dot if he or she wants to succeed. Upon recognizing this fact, an experience trader would usually turn to direct access trading systems instead of ordering through online brokers. Direct access trading can make things a lot easier when you are getting into the stock market for beginners.
Immediate execution of orders is the key factor for day trading success. Direct access trading eliminates the need for a middleman, which in this case is the online broker. Once the middleman is out of the picture, traders can save up to several minutes of their precious time. This is because direct access trading, as the term implies, allow traders to order directly from a client or a market maker who is actually working on the floor of the stock exchange. This allows immediate execution since orders need not pass through online brokers. One you’ve mastered the stock market basics things get easier quickly, then you can move onto things like beginners forex trading.
It is also important to consider the fact that online brokers might also work directly for market makers. This means that online brokers do not choose their market makers in terms of the price that they offer when executing orders. Instead, they would trade with their clients to earn commission. This is a practice termed as “payment for order flow” wherein online brokers earn rebates from routing trades to a certain market maker. On the other hand, direct access trading ensures that trades are executed with the market maker that offers the best price.
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Another reason why direct access trading seems to be costlier is the fact that online brokers receive commission from payment for order flow. Because they earn more from market makers, they can now afford to offer cheaper rates to traders. Commissions obtain from direct access trading are based on the number of traders executed by a trader within a certain period. The fees for every trade may range from $15 to $35. There will also be additional monthly charges for the software, ranging from $250 to $300. Some companies waive the software charges if the traders executed 50 to 3 trades per month.
There are several direct access trading systems available in the internet today. All of them differ in terms of speed and accuracy of order execution as well as the commission price that they charge for every trade. Professional traders have to be vigilant in choosing the perfect trading system based on these key factors.
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