What is Broker and what are its characteristics?

Don’t know what a broker is? In this article we explain what a Broker is and what are the most important characteristics of Brokers.

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Knowing in depth what a broker is will be absolutely necessary to be able to trade; otherwise you will not know what a broker is and its role in your processes.

A financial broker or stockbroker is defined as nothing more than a financial intermediary who acts on a commission basis on behalf of all his clients.

It is nothing more than an intermediary between all its customers and the market to execute the purchases or sales, which its customer orders.

It is a figure that facilitates transactions, as it is responsible for bringing buyers and sellers together according to the needs of both. 

It should also be noted that brokers represent either the buyer or the seller, but they cannot represent both parties at the same time.

On the other hand, they usually work in partnerships, but may also work independently or somewhere in between.

However, it is important to note that banks also often provide such services, long years ago they had a monopoly; but thanks to technological advances, what we know today as online brokers were born.

Online brokers operate on much more affordable commissions, which are ideal for traders who are just starting out in the world of trading.

Why is a broker needed?

In order to be able to start in the market it is necessary to comply with certain rules and conditions, also several licenses will be necessary, from these points comes the need to have the help of a broker.

Furthermore, one of the reasons why you should hire a broker is because of their high level of experience and knowledge of the tools necessary to be able to operate in the financial market.

Another of the many reasons to proceed with hiring a broker would be their high capacity to work under a lot of pressure, this is due to the volatile nature of the stock market world.

Also their suitable trading skills, and of course; this part will depend on the type of broker each investor hires, as well as:

  • Trust.
  • Support for help in any situation.
  • Guarantees that offer us, among others.

You may also be interested in: ¿Qué es el trading CFDs y cómo funciona? ¡Conócelo!

Get to know the types of Broker and learn how to differentiate between them. 

Below we will help you to differentiate between the two main types of broker, so that you can learn about them and get started in the world of trading.

Broker dealing desk o DD 

Broker dealing desks, also known as market makers, are market makers, as they have their own dealing desk.

On the other hand, all their operations do not come out of the market but are carried out by themselves thanks to their large number of clients; this is because they have clients who are looking to buy and others to sell.

But this is not the case, as the broker publishes the price at which they are willing to buy or sell, and the trader can accept or reject these terms.

Also, dealing desk brokers are also such market makers; meaning that if there are risks, they assume full liquidity even if it generates a potential loss for them.

caracteristicas de un broker

Broker non dealing desk o NDD

NDD brokers are the complete opposite of dealing desk brokers, meaning that they do not have a dealing desk.

They work directly with the market, and for this reason there is much more transparency, as they avoid broker-client problems at all costs.

As for the level of leverage, it is usually much lower as it cannot guarantee that all trades will be completed.

It is worth noting that this broker is often used by experienced professional traders; and if you want to trade effectively, you should definitely choose one of this type.

How to make the right choice? 

There are many factors to consider before proceeding to choose a broker, which we will show you below: 

  • Broker reliability.
  • The regulation to which it is subject.
  • Minimum deposit to proceed to open an account.
  • Available leverage.
  • The financial instruments it offers.
  • The financial instruments it offers.

There is now a very useful mechanism to learn how to invest, and then try out the services of an online broker without the need to put your investment at risk.

Demo Accounts

These are similar to a real trading account, but they come loaded with a virtual balance.

It is worth mentioning that the result of the operations will increase or otherwise reduce your entire virtual balance, so please note that you will not be able to make any profit beyond just learning.

It is worth mentioning that the result of the operations will increase or otherwise reduce your entire virtual balance, so please note that you will not be able to make any profit beyond just learning.

Before proceeding with any transaction if you wish to trade, it is of great importance to have a thorough understanding of the type of broker you wish to trade with.

In this way we will be sure that all our capital will be safe, for this reason it is always essential to have extra information before starting trading.

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