A forex broker is a broker or agent, that is, the individual or firm that acts as an intermediary between a buyer and a seller, usually charging a commission. A broker is an intermediary that requires a license to practice. It can be insurance, energy, real estate, customs, financial, exchange or stock exchange. He is also responsible for advising and advising on financial, customs or business-related matters. I would always recommend using the brokers of large investment firms, which will offer us free tools and very useful news when investing in forex.
An online broker resembles the traditional broker in that it allows the purchase / sale of currencies, securities and other types of investment products, and the main difference lies in the use of the web as mechanics to facilitate interaction with its customers. In this sense, the web becomes the interface for buying / selling currencies and at the same time it is the perfect platform to offer information and advice according to the needs of traders.
The use of information technologies in this field brings great advantages to the new online brokers. Among the main ones we could highlight the possibility of offering a service with uninterrupted schedule, greater comfort for the user who has access to their values wherever they have access to the Internet (portable, mobile, PDA) and, of course, lower commissions derived of a less expensive infrastructure compared to traditional brokers, as well as real-time information that will help us make the best decisions when investing in foreign currency.
Security in your transactions
It is necessary to discuss the issue of security, since at first it is the main obstacle that customers attribute to opt for an online broker. Although the web and e-mail to carry out any type of transaction have considerable advantages, it is necessary to have a minimum knowledge of security to avoid falling into the hands of a scammer (hacker). If the transactions are always made through the web of your broker it is impossible for anyone to intercept those communications. Currently, online banking is totally safe and reliable.
A broker is a company or financial entity that conducts buying and selling operations for its clients. That is, perform an intermediation executing purchase and sale orders, and receive commissions for these operations.
Brokers are also known as brokers, the only ones that have a license to operate within the markets. Therefore, if we want to operate within the stock markets we must do it through a broker.
The broker is the one that provides us with the platform to operate, thus connecting us directly with the market. In order to access these platforms it is necessary to enter the broker’s website or download your platform and connect with a username and password, which you must have previously created.
We also find electronic brokers, they are brokers that are handled electronically and no longer launch orders through a bank or a securities company. These brokers usually have lower commissions than traditional brokers.
To make the purchase or sale of securities, the trader is the one that determines which shares to buy or sell and communicates it to the broker that is that actually performs the operation.
Each broker will offer its clients a series of financial instruments on which they can operate, such as currencies, stocks, stock indices, commodities, precious metals, energy, …
To be able to practice as a broker, it is necessary to comply with the regulations in force governing the financial markets and also to have the supervision and license of the competent regulatory bodies.
Until a few years ago, a private investor could only access financial markets through large banks or certain financial institutions but with the advancement of new technologies and the Internet, online brokers have emerged that have revolutionized the sector, popularizing and democratizing investment by allowing anyone to operate from anywhere simply with a computer, tablet or smartphone and an Internet connection. All this with commissions much lower than traditional banks.
Types of Broker
There are 2 types of main brokers according to the way to execute the orders of their clients:
1- Dealing Desk Brokers
They are brokers that have a “money table”. This means that the operations of their clients do not really go to the market but they are executed in the broker’s trading desk. This type of brokers creates an internal market for their clients and they look for the counterpart of each operation within the operations of their other clients and if they do not find it they act as counterpart of the operation, assuring a liquidity and permanent availability even if this operation supposes a benefit or a loss.
2- Brokers Non Dealing Desk
The NDD brokers (Non Dealing Desk) do not have a “money table” and are only responsible for sending the operations to the market. They are connected with liquidity providers (which are usually large banks and financial institutions such as Deutsche Bank, Bank of America, Barclays, Goldman Sachs, JP Morgan, CitiBank, HSBC, …) which are the counterparts of each operation.
How to choose the right broker?
There are several factors to take into account when choosing broker: The reliability of the broker, the regulation to which it is subject, the minimum deposit to open an account, the available leverage, the financial instruments it offers, the fees it applies, …
There is also a very useful mechanism to learn how to invest and test the services of an online broker without having to put your money at risk:
– Demo accounts: These accounts are very similar to a real trading account but come preloaded with a virtual balance. The result of the operations will increase or reduce your virtual balance and although you will not be able to obtain benefits beyond learning, they will allow you to learn to invest or to do tests without having to deposit your own funds before starting to operate in a real account.
I hope this information has been useful to know what is a broker, what is its function, what is the difference between broker and trader or broker vs dealer, … You can send your questions from the comments section that you have a little below and also share the article freely on social networks. Thank you.