types of brokers in financial market
There are many types of brokers in financial market. When you want to start forex trading, you need to select the broker which suit your trading needs. Therefore, in this article, we are going to present to you the different types of brokers established in financial market.
In fact, there is no one single best broker that has all the best options in financial market. However, the broker you choose should be relative to your needs as a trader. If you intend to trade options, you will want a broker that has good options pricing. If you plan on short selling stocks, you will want to find a broker that has a good short list. However, if you want to trade forex, you will need a broker that offers small spread alongside with other requirements.
Full-Service Brokers are the first type of brokers in financial market. They are big firms and they offer diversified financial services. In addition, they often assign a licensed individual broker to each client. These firms have their own investment banking and research departments which offer analyst recommendations, products and access to initial public offering (IPOs).
As the name indicates, Full-Service Brokers offer full services related to the financial market. However, they charge high commissions and the clients have the ability to call the broker for a recommendation or to place an order. These brokers have a physical office and location.
To sum up, full-service brokers provide personal support, facilitate trades, and manage portfolios for their clients. In addition, they assign clients to individual stockbrokers and/or financial advisors. They are the main point of contact at a full-service brokerage firm.
Discounts brokers are the second types of brokers in financial market. In fact, they narrowed the services provided by Full-service brokers. They are stock brokers and forex brokers who carries out buy and sell orders at a reduced commission rate.
Unlike Full-Service brokers, discount brokers do not offer trading advice or trade on the client’s behalf. Their mission is limited to execute buy and sell orders. The emergence of new technological invention supported the explosion of of Discount Brokers since their services were limited to wealthy people before. Any person on the planet can use a discount broker and trade forex, stock, options and other assets.
In addition, what made Discount Brokers popular, is the small commissions and small capital for trading. Some of them accept opening an account with $0. Today, as they operate through online platforms, Discount Brokers are associated with online brokerage.
With easy access to technology, most brokers today use online platforms to communicate with their customers. They are called online brokers because face to face interaction is substituted by online platforms. Both types of brokers stated above use online technologies to communicate with their customers. However, the work of Full-Service Brokers is more official and their clients have access to many features that Discount Brokers cannot afford. This includes investment advice, face to face interaction…. etc.
In addition, the advent of online brokers lowered fees. Therefore, instead of physical offices, online brokers interface with customers over the Internet. In the United States, many people refer to online brokers as discount brokers. People involved in online trading use online brokers.
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