Become a broker, business activities and serious responsibilities - Eaglesinvestors

If you want to become a broker, you need to understand clearly what we are talking about. A broker is an intermediary between customers and producers of services. There are several business activities. We have brokers in insurance, real estate, vehicles sale, etc. The main objective of this type of broker is to offer affordable prices to its customers by playing on the quantities on the producer side.

Become a broker – Stock broker

There are as many “classes” of brokers as there are, for example, “classes” of bankers. By comparison, my banker offers me for sale alarms, phone subscriptions, insurance and from time to time, a credit card. It’s called a banker. Is this type of banker the same as the investment banker or investment banker? NO. It’s not the same for brokers. This term includes several trades and to find a way to find his broker today seems mission impossible.

The broker can perform several tasks such as the receipt and transmission of orders, the compensation (delivery of financial products, ie pay buyers and sellers winners and losers) or simply the maintenance and account management of customers.

Become a broker – Business activities

In France for example, brokerage activity is regulated by the AMF (Financial Markets Authority). There are few brokers with their head office in France because this regulation, in favor of the respect of the consumer, is very heavy, binding, time consuming and expensive.

The rise of the Internet has allowed the development of the particular trading and therefore the business activities of brokers. You had to go to your bank or make a phone call to buy / sell a financial product; you just need to connect to the Internet, open your trading workstation, and in two clicks, the order is passed, capital gains saved and transmitted to your bank account. Some brokers even offer a credit card to their client in order to settle directly with the trading gains.

Become a broker – Financial involvement

become a broker

This phenomenon obviously had good and bad consequences for the sector. Among the positive points, the financial markets have evolved because more and more people have started to trade more, better, more often. New financial products have made their appearance allowing everyone to find a shoe to their feet according to their expectations, objectives, schedules and financial means. Among the negative points, we have seen more and more brokerage actors, a good majority of which has been unscrupulous legal and moral rules (bad or no transmission of orders from customers, abusive fees, non-existent service or in foreign language, etc.).

The broker manages your trading account. He executes your orders of entry and exit of the market and draws for it a commission. He is the intermediary between you and the market. You can not trade without him but that does not exempt you from being attentive to the services offered. Your broker must have direct access to the markets you want to trade, with no intermediary between the market and him. Access to the broker’s platform must be easy to use for you, even if it can be learned quickly, try to trade in your language or the one you understand. Avoid brokers whose rates are prohibitive.

 

Become a broker – Commissions

As a general rule, a “good” broker is paid commissions on the trades of his clients. For example, if you trade the CAC40 futures contract (FCE), that you have 3 contracts and that the price is 4 EUR in / out per contract and per trade, it means that your broker will take you in commission 2 EUR go + 2 EUR back x 3 contracts = 12 EUR per trade. Imagine that you traded 10 days a month and 10 months a year, you will leave your broker (whether you win or not on the markets) 1,200 EUR.

Some brokers (but not all), to allow their clients to trade on the Forex market, do not charge you a commission but offer you a spread. The spread is the difference between the purchase price (ask) and the selling price (bid). The advantage for a trader to trade with spread is that there is no commission. The disadvantage is in terms of timing: the forex broker (market maker) will not allow you, once on the market, to leave during a specific price range.

Become a broker – Bank brokers

The first category concerns bank brokers. Indeed, banks have for a long time been the only financial intermediary for an individual. Technological evolution, as we have seen, has allowed everyone to intervene directly in the markets. What is the point of going through his bank to place an order? More and more clients have therefore turned away from their bank to (1) manage their own trading capital (recent financial news has shown the weaknesses of traditional financial institutions such as banks); (2) to reduce stock exchange / bank fees (removing an intermediary reduces costs). The banks have therefore counter-attacked on the one hand to try to retain their customers and on the other hand to capture new ones. These online banks / brokers are very present in the media right now (“my banker, it’s me”).

Become a broker – Forex brokers

A second category of “new” brokers includes discount brokers, market makers and other Forex brokers. These intermediaries do not charge a stock exchange commission, but offer high spreads. It is also possible to open trading accounts for free, any opening of an account, no matter the broker, is anyway free. And especially without financial minimum (besides the margin for Futures).

Although it may seem like an advantage, opening a trading account without a minimum deposit is a decoy: statistically, traders who do not have a financial “breath” do not fizzle in the markets. There is no ticket at the entrance, so anyone can intervene on the markets which is the happiness of traders and professional savvy. Trading is a zero sum game, which one loses, the other wins. When you open a trading account with 300 euros, statistically, you will lose them very quickly. Often, these brokers even offer free trading training. This is a second decoy for two reasons: (1) it is a training on the use of the broker’s trading platform (or how to quickly lose its capital); and (2) nothing is free.

Become a broker – Introducing brokers

A third category of brokers are not actually brokers. They are called introducing brokers or introducing brokers (IB). It is simply a client opening for his broker trading accounts. This is a business relationship.

the IBs provide the brand with additional business. And they provide a means of helping customers in addition to customer service provided by the brand. Introducing Brokers are usually paid on part of their clients’ spread. In more than 90% of cases, the brokerage firms has a very close relationship with its IBs. And they provide him with multiple benefits that are normally passed on to customers. Most of the case, the IBs is obviously respectable.

To conclude, every trader must have a broker. The latter is responsible and executes his orders. The broker provides a whole range of services (financial products, stock market orders, etc.) for a fee: the commission.

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6 Comments

  1. newtown ntc33 says:

    First off I would like to say fantastic blog! I had a quick question in which I’d like to ask if you don’t mind.
    I was curious to find out how you center yourself and clear your mind prior to writing.
    I’ve had a difficult time clearing my mind in getting my ideas out.

    I truly do take pleasure in writing but it just seems like
    the first 10 to 15 minutes tend to be lost simply just trying to figure out how
    to begin. Any recommendations or tips? Cheers!

    • Patricia Admin says:

      Dear Newton,

      A great way to clear your mind is by having a nice and warm tea!
      Also having a professional trader in-house does help when writing about technical stuff 🙂

      We encourage you to keep writing and reading our site!

      Regards!

  2. furtdso linopv says:

    I have been absent for some time, but now I remember why I used to love this blog. Thanks, I will try and check back more frequently. How frequently you update your website?

    • Patricia Admin says:

      Hello!!

      We are happy you like our Website! We update the site daily :).

      Have fun and looking forward to seeing you soon!

  3. The CHF currency pairs have, sometimes, a spread of 4 or more pips. Is this normal for a ECN broker?

    • Patricia Admin says:

      Dear Zackery,

      Thank you for stopping by!
      For an ECN Broker it is indeed normal to have 4 or more pips for CHF currency pairs.
      This is due to the interest rates decisions and the Liquidity Provider of the Broker.

      We would recommend for you to have a look at our listing of different brokers and compare their spreads!

      Let us know if there is something else we can help you with!

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