In trading, the broker (or broker) is a professional who acts as an intermediary between a seller and a buyer to carry out a financial transaction. Here is more information to fully understand his role.
Brokers are called upon in several areas to provide theirs brokerage services : insurance, real estate, financial markets… These professionals are essential in the commercial sector as they allow for the execution of transactions. To understand how the stock market works, it is therefore essential to know what the profession of broker is, also called broker in English.
Definition: what is a broker (or broker) in finance? What is its role?
The broker or broker is a professional who acts as a mediator in order to establish a relationship between customers and the financial market. It is an intermediary between buyers and sellers of financial products: stocks, cryptocurrencies, CFDs, ETFs … In finance it is considered a liquidity provider. He is paid for establishing contact between a seller and a buyer. This is called the brokerage commissions.
The financial broker takes care to carry out financial transactions of a corporate or individual client. For example, in forex trading, it is responsible for executing orders to enter and exit the market. This specialist plays role of central pillar between clients and the financial market. The role of the forex broker is therefore to facilitate transactions between the various clients who place orders.
What are the different types of trading brokers?
In trading, there are four different types of brokers. You have stocks, full service, forex and online brokers. Sure they all play the role of intermediaries, but they work differently. Each of these categories of professionals has distinct functions. Some are brokers who execute orders and give advice while others are executors.
The stock broker
Still known as investment broker, the stockbroker manages, buys and sells the shares. This specialist plays an indispensable role, because retail investors do not have the ability to obtain shares directly on the stock market. The broker is then responsible for buying and selling the shares in which you want to invest. For flawless work, you need to find a competent stock broker.
The full service broker
Full service brokers are still called financial advisors. They offer their clients services such as: tax consultancy and research, retirement and financial planning. Those who do not have the time to do their own financial planning can therefore turn to this specialist. Full service brokers often charge higher prices than other industry professionals. It is the range of services on offer that sets them apart from other brokers.
The courtier forex
Still called the forex broker, the forex courtier deals with buying and selling currencies on your behalf. With it, you can access the financial market at any time. It is also possible to speculate on currency pairs from around the world. To remain competitive, these specialists are reducing their prices. However, you have to pay some fees when you claim them. In the forex market, to trade you buy or sell the pair you want to trade.
The online broker
The online broker certainly plays an intermediary role, but does not offer any additional advice or services. It acts as a simple executor of the will. Therefore, it applies to low commission. By choosing this type of broker, you will have to do it manage your wallet yourself. In general, the commissions depend on the broker’s work. If the broker only executes your orders, the commissions you will have to pay will be lower.
Thanks to its ease of access, the online broker is perfectly suited if you want to become a home trader.
What is the difference between the trader and the broker?
The trader and the broker are two professionals who intervene in the financial market to carry out various operations. Both of them operate in the stock markets by buying and selling stocks. But, while one gives orders, the other executes.
The trader and the broker have complementary functions. A trader is any person or company who buys and sells stock. It can be considered a thinking head. This can act like a seller or a buyer. Therefore, everyone can be a trader by providing these two functions. To do this, all you have to do is observe the stock market, have the funds to invest and decide. However, it cannot perform transactions on its own. That’s why broker intervention is required. This is the broker authorized to make sales and purchases.
The trader, when he decides to buy or sell, requires the intervention of the broker to carry out the operations. He can do it simply from an online brokerage platform or a trading application. These two specialists therefore complement each other in their duties. The trader profits from the trades while the broker gets paid on commission.