Pros and Cons of Direct Access Trading

Direct access trading is a type of trading allows you to avoid working with a broker and gain direct access to the market. You will be able to improve your trading results. However, at the same time, in order to do this you will have to give up a few things as well. Here are some of the pros and cons of direct access trading.


The biggest advantage of direct access trading is that you will be able to skip your online stockbroker. Instead, you will have direct access to the stock market. As soon as your orders are placed, they will be processed into the market. When you work with an online stockbroker, you will have to wait for the broker to place the order for you. In most cases, they will do this within a few seconds, but sometimes it can take longer. With direct access trading, you will not have to wait on anyone to place your orders for you. The second that you push the button, it will be processed.

Another advantage of direct access trading is that you can be more profitable. When you start trading with large amounts, it is critical for you to get immediate execution. You will be going up against institutional traders and individuals who have a large amount of experience in the market. If you want to be successful, you need to be able to get your orders placed immediately. This could be the difference between winning and losing a trade. While it may not seem a big difference, over the long-term it can pay big dividends.


Even though the having direct access to the market is convenient, it comes at a price. In fact, the price of direct access trading systems is usually quite of bit more than working with an online broker. Every time that you place a trade in the market, you will have to pay a commission. When working with a direct access trading system, the commission that you have to pay could be as much as double what you would have to pay with a traditional broker. This means that you are going to be gaining something in your wins and losses, but you may be giving a good portion of it back in commissions.

This type of system may be unnecessary for certain types of traders. You might be paying extra money for something that you really do not need. When you utilize direct access trading systems, they are typically better for traders to want to get into and out of trades quickly. If you will be utilizing a long-term buy and hold strategy, you really do not need to concern yourself with immediate order execution. If you plan on holding the stocks for several years, the enterprise of the trade will not make much of a difference down the road.

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