A broker is an individual or company ( brokerage firm ) that arranges transactions between a buyer and a seller, and gets a commission once the transaction is executed. In other words, it is an actor who acts as an intermediary between the two parties in a buy / sell operation and charges a fee for its services as a profit.
Generally speaking, a broker is an independent agent that is used extensively in some industries. The primary responsibility of a broker is to bring together buyers and sellers so that they can trade with each other using the broker itself as an intermediary. Therefore a broker is a facilitating agent for transactions between buyers and sellers. An example could be a real estate broker who facilitates the sale of a property.
Brokers can also provide considerable market information in relation to prices, products and market conditions. Depending on the case, brokers may represent the seller (90% of the time) or the buyer (10% of the time) but not both at the same time. An example might be a stockbroker, who performs the sale or purchase of shares on behalf of his client. Today brokers play a key role in buying / selling stocks, bonds, futures, currencies and other financial services.
There are several advantages to using a broker. First, they know the market and have usually established relationships in the industry that allow them to offer market access that many investors could never have on their own. Brokers have the resources and tools to reach the largest possible base of buyers and sellers. Many brokers are related to large banks or other financial institutions, which gives them access to even more resources. Another benefit of using brokers is the cost, as they may be cheaper as in the case of the Forex, where there are companies that open accounts with a low initial capital and charge relatively low commissions compared to other financial markets.
Previously, only wealthy individuals could afford the costs of broker services to access markets. However, the Internet has made it possible for online brokers (discount brokers or discount brokers), which allow investors to operate at a lower cost, although they do not provide any kind of personalized advice (only in some cases). Thanks to these brokers, almost anyone has the possibility to operate in the markets.
Before opening an account with a broker and paying for their services, regardless of the market in which the investor is going to invest, it is important to devote the necessary time to investigate the best options of these companies or individuals, and choose that broker That presents the best conditions and is better adapted to the needs of the investor. For example, if you want to invest in the US stock market, you should choose a duly accredited and regulated broker, which complies with strict financial services regulations in that country. On the other hand, a trader interested in the Forex market should choose a broker that has a good reputation and is registered and regulated by one of the most important financial regulatory agencies in Europe or the United States for example.