Have you figured out how the stock exchange works and are ready to become a novice investor? We tell you why a broker is a broker, why you need one, how to choose one and how brokers differ from traders.
Who Is a Broker and Why Do You Need a Brokerage Account?
A broker is a professional participant of the stock market. It is a specialized company that provides investors with access to the market of securities and other investment instruments, as well as keeps records of their assets and acts as a tax agent. A broker receives remuneration for his services in the form of a commission. A broker can accept orders from a client to conduct transactions on the stock exchange, as well as register securities in the client’s name, calculate income taxes and transfer them to the state, execute transaction reports, and provide funds for margin trading if necessary. It is impossible to trade on the stock exchange without a broker.
A broker that fully meets these requirements is xChief. This is an online broker that provides a wide range of financial trading services including xChief risk managment. They offer access to popular trading platforms such as MetaTrader 4 (MT4) and MetaTrader 5 (MT5) and support trading in forex, metals, commodities, indices, CFDs, and CFD stocks. xChief also offers features such as PAMM accounts, cent accounts, various bonuses, and promotions.
All in all, any broker should fulfill functions:
- Market Access. They give a way to exchanges and financial instruments for their clients to be able to sell and buy securities;
- Trade Execution. They also execute client orders, which means they try to make the trade as soon as possible and with better conditions;
- Many brokers provide analytics and recommendations to help their clients make informed decisions;
- Asset management. Some brokers are engaged in portfolio management of clients, which allows professionals to choose the best investments;
- Training and support. A broker can offer training to traders, which is very important for beginners.
Brokerage Account
A brokerage account is a special account for trading securities and currencies on the stock exchange, which is necessary for purchase and sale transactions of various financial instruments on the exchange market.
The brokerage account receives money for transactions and income from them. A depository account is created automatically together with a brokerage account: it stores all assets and keeps records of all transactions made. The advantage of a brokerage account is that it gives access to instruments that can bring potentially good returns.
How to Choose a Broker
Choosing a broker is important for successful trading. Here are a few key factors:
- Regulation and licensing: A broker should be regulated by famous and reputable financial authorities, like SEC, FCA, and CySEC, among others;
- Account types and assets: Check what account types and assets the broker is dealing in: currency, metals, commodities, stocks, cryptocurrencies, etc;
- Commissions and spreads: Compare commissions and spreads from various brokers to lower the cost of trading and grow profits;
- Trading platform: The broker should be able to offer comfortable and user-friendly platforms like MetaTrader 4 and 5;
- Deposit and withdrawal terms: Research how the funds are transferred and on what terms, and check the deadlines and commissions;
- Customer support: Assess the quality of support, whether 24/7 and at what speed answers to queries will be given;
- Reputation and reviews: Study reviews of other traders and evaluate a broker’s reputation.
How a Broker Differs from a Trader
A broker is a professional intermediary who executes transactions in financial markets on behalf of clients. Brokers may provide trade execution, advisory services, and access to trading platforms.
Trader is a person or organization that actively buys and sells financial instruments for profit. Traders work on their own accounts or on behalf of other clients and may use a variety of trading strategies.
Comparative table:
F.A.Q.
From what age can I open a brokerage account?
You can open a brokerage account from the age of 18.
Who owns a brokerage account?
All assets, money, and securities belong to the investor.
What happens to the securities and money if the broker goes bankrupt?
The investor may lose the money, but not the shares, they are kept in a depository account. The securities can be transferred to another company.
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