An Introduction To Direct Access Trading

Online trading does not always ensure better trading. Many active traders, especially day traders demand better execution of their trades for stay on the market. This is where Direct Access Trading (DAT), also known as Electronic Direct Access Trading (EDAT) has its importance. Direct access trading is the trading with Direct Market Access (DMA). This direct market access enables traders to execute their trade faster, with in fraction of a second, without any broker intervention. Direct access trading is a fully automated trading procedure which is easy to perform; but demand extensive trading experience.

Direct access trading requires stand alone or trader side trading platforms and high speed electronic networks like broadband. The DAT platforms provide level2, or even level3, access to the traders, which enable them to monitor the real-time ask and bid prices for a particular stock in a market with the order size and market maker(s) information. The trader then chooses his or her desired price and by clicking on that can commence his purchase order. The trader can also specify the number of stocks, or any other financial instrument, that he or she wants to trade and can route the order to his choice of market maker. The automated system of the market maker then matches this bid with others and executes the order within a fraction of a second; the trader can instantly see the result.


As told earlier, direct access trading is a fully automated process which does not involve any human intervention. So the sole responsibility is on the trader to make his/her trade a profitable one. The trader has the direct control of his money and he/she must be experienced enough to find and exploit the right chances and to escape or minimize the losses. He must route his orders to right market and market maker. Direct access traders follow a variety of strategies to profit from the markets; they include scalping, news playing, range trading, momentum trading, swing trading, rebate trading etc.



Direct access trading is made possible by direct access brokers, who offer the trading account and trading platform for traders. They usually charge much less commission fees than online and traditional brokers, and also offer much more leverage. The transaction fees usually range from $5 to $30 for a trade of 1000 shares. The other fees charged by direct access brokers involve ECN fees and trading platform fees. Many brokers offer different plans and all the above fees may decrease with increase in number of trades and increase in volume per trade. Remember many brokers charge inactivity fees and extra fees on those traders fails to attain activity minimums.

By: Praveen Ortec

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Praveen Ortec works for a direct access broker offering international day trading for stock, options and futures trading on 4 different online day trading software.