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stock broker can be either a person or a firm that trades in the stock market on behalf of its clients. The stock brokers are responsible to issue the buy or sell orders in the stock market when their clients ask them to do so. The stock brokers do all the buying and selling of securities for their customers by charging a fee called brokerage.
The transactions in a stock market can only be done by two members of the exchange only. Hence, any individual wishing to invest in the stock market, cannot just go and invest in the market, but has to go through a registered broker to carry out his transaction. The stock broking service may be classified in three types. The stock broker may just carry out the client's instruction by buying or selling the stocks. The stock broker may advise the clients on the buying and selling of the shares but may not bother about what the client decides at last. Discretionary dealing is another service of the stock broker where the broker is responsible for all the dealings and decision taking in the market on his client's behalf.
There may be three types of stock brokers:
- Full Service Broker
- Discount Broker
- Direct-Access Broker
A full-service broker generally provides the clients with various financial services depending on the requirements of the clients. The services provided by them may be investment research advice, retirement planning and tax planning. A discount broker executes the client's instruction by buying or selling the stocks but refrains from offering any kind of investment or financial advices. The direct access brokers are those who make the traders trade directly with electronic communication networks (ECN's) making the trading much faster.
The investors who are new in the stock market can go to a full service broker. The brokers help the investors with necessary information thus helping them to decide on which stock to invest. For the experienced investors who are quite well aware of the market, a discount broker is sufficient to do the trading on his or her behalf. The day traders generally prefer to use direct access brokers.
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