What is a broker and a brokerage company?
Brokerage company or broker (from English broker - broker, broker, intermediary) - a legal entity acting as an intermediary in the securities market and currency market. A broker performs the functions of buying and selling securities, exchange commodity or currency. The brokerage company's activity is based on the realization of trade transactions. A broker connects a seller and a buyer of a financial instrument.
What services does the broker provide?
First of all, the broker provides access to the trading platform, which allows you to enter the currency market and perform trading operations. The trading platform is the main tool of any trader. It can be used to open and close trading positions and, in addition, to get the most up-to-date quotes of currencies and monitor the movement of their value.
Second, brokerage companies provide clients with leverageThanks to this leverage, traders can operate on the market with amounts significantly exceeding their deposit. That is, having only 100 USD on the account, with a leverage of 1:100 a trader can make transactions for amounts up to 10 000 USD.
In addition to conducting trading operations, and providing trading instruments such as currency pairs, precious metals and CFD contractsThe brokers also provide the following services:
- economic newsfeed;
- calendar of important economic events;
- fresh forecasts from leading analysts;
- useful information for beginning traders;
- free indicators and advisors.
What types of brokerage companies are there?
Companies engaged in brokerage activities are divided into the following types:
- Market Makers - large financial organizations providing services on financial markets for small brokers, as well as for private traders with funds under management of at least 50 thousand dollars.
- Brokerage and stock market firms - are affordable organizations for private traders. Such firms offer the trader a wide range of financial services on the trading floors.
What does the broker make money on ?
As with all commercial organizations, the primary purpose of brokers is to make a profit.
One of the main sources of income for a brokerage company is the commission imposed on each transaction concluded by a trader. It can be imposed in two different ways: in the form of a small premium to the spread, or in the form of a direct payment for each transaction.
Of course, every brokerage company is interested in the success of its clients, as the amount of commissions received from each open deal depends on it.
How to choose a broker?
When choosing a broker for trading on the currency market, you should pay attention to the following points:
- Legal reliability of the broker is the presence of a license for brokerage activities, as well as under whose jurisdiction the company is located
- Broker's reputation - you can look at broker ratings, read customer reviews on forums
- How long the broker has been working on Forex - it is too dangerous to trust your money to a company opened "yesterday", and vice versa - the old-timers of the market have proven their reliability during the time of work on Forex.
- The range of financial instruments and markets to which a trader is offered access - the more the better.
- Trading conditions - the amount of spread, the amount of leverage provided and terms, commissions taken by the broker on forex, terms of deposit and withdrawal of funds from the account
- Availability, cost and quality, and cost of training, counseling, whether the broker provides analytics ;
- Professionalism of the broker's staff - do not hesitate to ask all your questions before opening an account, and if you can not get a clear and clear answer from professionals, it is better not to open an account with such a broker.