FOREX ACADEMY

WHAT IS A BROKER?

What is a Broker?

One of the most common questions of any person that is willing to enter on the exchange market is: What is a broker? What do I need one? This lack of knowledge is an obstacle in the way that turns out many people to enter this exciting world. So if you have been wondering what is a broker, you have come to perfect place as we are ready to tell you everything you need to know about the topic… so let’s go.

So… what is a broker? A broker is any entity, being a person or a firm that is willing to act as a connection or intermediary between any person and the security exchange market. One of the main questions that people have after understanding this concept is: “Why do I need a intermediary?, What can’t I operate by myself? and the answer to that question is really simple. Security exchanges will only accept orders from individuals or firms that are members of that given exchange, so any individual trader or investor will need to go through these intermediaries in order to operate. These intermediaries or brokers, get compensated through commissions, fees and often they are paid by the exchange.

 

What does a broker do?

The main task of a broker is of course execute different client orders, but they certainly do many more things beyond that. Brokers provide investar with data and research in order to help them make informed decisions in their investment operations. Depending on the client, brokers might also offer different products that the firm serving as broker might offer and that could be good fit for the client. They might also offer access to the stock market at discounted prices, allowing inverstors to trade at lower prices, with the advantage of having a personalized advice. These are called discounted brokers.

A broker will:

  • Act as intermediary between the investor and the exchange.
  • If the broker is a firm, it can offer additional services to their clients.
  • They can operate on behalf of the investor in the case of discounted brokers. 
  • Full-Service brokers can provide a full battery of additional services.
what is a broker

Full-Service Vs Discounted Brokers

Among the two options an investor can pick to make their operations are the discounted brokers and t he Full-Service Brokers. They operate in different way and the decision of going with one or another depends on the client needs. In the case of Discount brokers, they can execute different types of trades while operating for a client. They charge a small commission on each operation and they earn money on the high number of operations they do. One important part you should know is that they don’t offer investment advice. Discounted brokers, are a good online platform for self-directed investors that make their on decisions based on their analysis and knowledge.

 

On the other hand, you have Full Service Brokers, offer a more in-depth service to go alongside the trading service. These services include market research, retirement, finance and investiment planification and they also offer several investment products aimed at client interested in getting the most out of their investments. Because all of this, their costs are higher, so investors will pay higher fees on their trades. These kind of brokers use their status as brokers to offer the exchange service alongside their other products like retirement planning or asset mangement.

The importance of a Broker.

Because of the importance of a broker in the process of investment, it’s extremely important to select a proper broker, that can provide everything that you might need to invest succesfully. Because of this, we do a extensive analysis of every broker to make sure that you have all the proper information you need before deciding to go with a particular broker. Check all of our reviews here.