What a Broker Is: Understanding, Types, and How to Choose a Trusted Broker

broker

Do you know what a broker is? Simply put, the understanding of the broker is the individual or company that organizes and assists in the negotiation process between the seller and the buyer.

As we know, one of the most important things in trading activities choosing a trusted broker. Because not a few brokers harm the users of its services in unethical ways.

This article will be discussed about the broker concerning the world of trading. Well, in this article I want to review several things about brokers, including:

  • A brief explanation of what a broker is.
  • Types of brokers in trading.
  • Characteristics of a trusted broker.
  • The advantages of working with a trusted broker.

If you are interested in this topic, then you should listen to it to the end.

Understanding Brokers

In general, a broker is an individual or company that connects the seller with the buyer. The broker will benefit in the form of commissions from trade transactions that occur. 

In the world of trading, the understanding of brokers is an institution or company that regulates trading activities and transactions between traders and the market.

In other words, a broker is a third party or intermediary that connects between the seller and the buyer who is in the forex market, capital market, and money market.

The way the broker works is quite simple, which is to bring the seller together with the buyer and arrange trade transactions. When a transaction occurs between the seller and the buyer, the broker gets a commission from the trading activity.

Types of Brokers

In the world of trading, several types of brokers are distinguished by their system. The types of brokers are as follows:

1.    Dealing Desk Broker (DD)

Dealing desk brokers are often also referred to as bookie brokers or bucket shops. This type of broker benefits from traders who experience losses.
For example, if a trader loses $100 then the dealer broker will get a profit of $100.
Here are the characteristics of city brokers that you should know:

  • Apply many trading rules (Terms and Conditions).
  • Transactions in trading software often experience a slowdown or acceleration of order execution, price does not move (freeze), price manipulation, and other things aimed at making traders suffer losses.
  • Usually offers large deposit bonuses, high leverage (more than 1:1000), fixed spreads, and others.

2.    Non-Dealing Desk Broker (NDD)

Non-Dealing Desk brokers are also called non-dealer brokers. This type of broker can be distinguished into two kinds, namely ECN broker(Electronic Communication Network), STP broker(Straight Through Processing).
Here are the characteristics of non-city brokers:

  • This type of broker benefits only from spreads (difference in selling price and purchase price made by traders).
  • There is no conflict of interest between the broker and the trader so traders are free to apply their trading style (e.g. scalping, hedging, trap, and others).
  • The leverage given is generally not very large (maximum 1:500).
  • Spreads used floating spreads (variables) that can change according to market conditions.

3.    Hybrid Broker

Hybrid Broker is a combination of Dealing Desk broker with ECN/ STP.
In general Hybrid brokers have several types of trading accounts. In practice, on trading accounts with small orders (micro, mini), Hybrid brokers act as bookies, but orders with larger lots will be processed ECN/STP.

Characteristics of a Trusted Broker

Traders should be careful and observant in choosing brokers for trading activities, be it forex or stocks. Referring to the understanding of brokers and their types, the following are the characteristics of a trusted broker who can be a partner in trading activities:

1.    Have Legality

The legality of the broker is very important to consider to ensure the security of trading funds. Preferably, choose a broker that has been registered with an institution or legal entity, whether it is abroad or domestically.

2.    Have a Good Background

The background of a broker can be known by reading various testimonials, reviews, and comments of experienced traders in the broker.

3.    Ease of Deposit and Withdrawal

Each broker has different rules and services in terms of deposits and withdrawals. Trusted brokers usually have several methods for depositing and withdrawing funds as well as a quick process.

4.    Trading Platform Features

The trading platform software offered by brokers should be easy to use by traders, where the interface display is good and there are several tools to perform analysis.

5.    Quality Trading Technology and Tools

Trusted brokers care deeply about their clients and will invest in offering traders quality trading tools and technologies, such as the Metatrader 4 app for Android.

6.    Serving Clients Well

Customer service from brokers is also crucial because it reflects the broker is indeed competent in its field.

7.    Reasonable Trading Costs

In general, brokers take advantage of spreads (difference in bid and ask prices) and commissions. Trusted brokers generally impose reasonable commissions/spreads and not too large so that traders can get maximum profit.

Advantages of Cooperating With Trusted Brokers

The broker itself is a place of the transaction for investors to trade stocks, mutual funds, options, and bonds. This network must previously have a licensed business, then be able to carry out transactions according to the rule of law.

There are many reviews related to trusted broker reviews with some advantages such as the following:

1.    Provide a Demo Account

Demo accounts are useful for learning how to ins and outs of a broker for free even if it is time-limited. You can run it with virtual money that simulates real funds. Other advantages clients can try all the features of the trading platform.

For beginners, this opportunity should not be missed because it gives a lot of advantages. They can also consider whether to take it or take it off. The right strategy increases profits, especially when looking at great opportunities.

2.    Trading-Related Educational Materials

Learning is very important to increase knowledge and get surefire tricks to be more felt. Education is done not only in one way, but with several points such as face-to-face, online sharing, and webinars.

This trusted broker focuses on teaching beginners to become professional traders with multiple incomes. The learning system itself is carried out through several levels, ranging from basic steps, profitable strategies, additional knowledge for free, and success tips.

3.    Security Guarantee

Security guarantees can be obtained because the broker is already licensed, if it violates the rules then loses permission to run its business. For that choose a trusted provider and usually, they offer support through several official platforms.

You can access the support 24 hours every weekday. The language used is not only English there are also German, Chinese, and Thai. There are also videos, tutorials, webinars, and training by experienced mentors.

4.    Licensed Company Regulations

Some companies allow to trade under a license, but there are still special restrictions. But if you join an online broker, you should first read and pay attention to the rules on the home page or main menu.

Some brokers give their clients access to register with foreign licenses to increase leverage. Users can then see the world's most famous regulatory authority. However, also make sure the rules are safe such as NFA, Bafin, and ASIC.

5.    Get Maximum Profit

Running a trade is not easy, basic science supplies are indispensable for beginners with a market that is open 24 hours per week. Therefore, it will be very important to choose the cheapest provider to get a lot of profit and also balanced with a qualified skilled.

In general, traders earn money from trading results. It could also be in other ways, such as charging trading commissions and giving clients a fairly wide market. Even so, always pay attention to the development of the share price in search of more profit.

6.    Adding Network

Many professional traders beat the market with a variety of trading strategies. In other words, the more you plant stocks, the more you can get a wider network so that the experience becomes more significant.

For beginners do not need to worry when going to start, the solution is to be able to choose with a small capital first. Next, learn in-depth the science related to trading and brokers to win an increasingly tight competition.

7.    Get Professional Trading Guidance

Trading guidance is needed to prepare each individual to be better prepared to compete with professionals. But before that, it is good to master some foreign languages (especially English), because there are many great opportunities in trading stocks abroad.

The development of trading strategies is useful to beat the market because you have to struggle with several big banks and people who are already experts in their fields. On the other hand, make sure you have filled the portfolio correctly based on the actual data.

Conclusion

From the explanation above we can understand that the existence of a broker is an absolute thing in trading activities, especially in the foreign exchange market (forex) and the stock market.

Thus a brief explanation of the understanding of brokers, types, characteristics of trusted brokers, as well as the advantages of using a trusted broker. Hopefully, this article is useful and adds to our insights together.


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