In trading, the broker (or broker) is a professional who plays the role of intermediary between a seller and a buyer to carry out a financial transaction. Here is more information to fully understand its role.
Brokers are called upon in several areas to provide their intermediation services : insurance, real estate, financial markets… These professionals are essential in the trading sector since they allow transactions to take place. 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 his role ?
The broker or broker is a professional who serves as mediator in order to establish a relationship between customers and the financial market. It is an intermediary between buyers and sellers of financial products: shares, crypto, CFDs, ETFs… In finance, it is considered a liquidity provider. He is remunerated for establishing contact between a seller and a buyer. This is called the brokerage fees.
The finance broker deals to carry out financial transactions of a corporate or individual customer. For example, in forex trading, it is responsible for executing market entry and exit orders. This specialist plays a role of central pillar between clients and the financial market. The role of the forex broker is therefore to facilitate transactions between various ordering clients.
What are the different types of trading brokers?
In trading, there are four different types of brokers. You have stock, full service, forex and online brokers. They certainly 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 stock broker manages, executes the purchase and sells 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 therefore responsible for buying and selling the shares in which you want to invest. For impeccable 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 advice and research, retirement and financial planning. Anyone who does not have the time to do their financial planning can therefore call on this specialist. Full-service brokers charge prices that are often higher than other professionals in the field. It is the range of services offered that differentiates them from other brokers.
The forex broker
Still called forex broker, the forex broker takes care of 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 all over the world. In order to remain competitive, these specialists are reducing their prices. However, you must pay certain fees when you request 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 advice or additional services. He acts as a mere executor. Therefore, it applies a low commission. By choosing this type of broker, you will have to manage your portfolio yourself. In general, the commissions depend on the work of the broker. If the broker only executes your orders, the fees you will have to pay will be lower.
Because of 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 transactions. They both operate in 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 that buys and sells shares. He can be considered a thinking head. This can act as a seller or a buyer. Thus, everyone can be a trader by performing these two functions. To do this, you just have to observe the stock market, have the funds to invest and decide. However, he cannot carry out the transactions himself. It is for this reason that the intervention of the broker is necessary. This is the mediator authorized to carry out sales and purchases.
The trader, when he decides to buy or sell, requests 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 functions. The trader profits from the trades while the broker is paid on commission.