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Know your needs before Engaging a Broker

3 min read
Know your needs before Engaging a Broker

The role of a broker in the share market is not unknown to anyone. In this age of online dealing also many clients prefer to deal in the market with the help of a broker only. There are various reasons why each client deals in a different manner even with a broker as some may prefer to have complete services while some may also go for discount brokers. A brokerage house forms a financial institution that makes possible for the investors and traders present within the stock market to sell and purchase financial securities.

To implement a contract within the stock market, there is need of two parties like buyer herein called long position holder and seller known as short position holder. Fundamentally a broker performs the role of an agent amid seller plus buyer and makes easy for them to carry out a trade on diverse financial securities. For the services, brokerage house takes compensation by way of commission fees when the deal takes place. There are found two kinds of brokers in the financial industry as:

1-Traditional or full-service brokers

2-Discount brokers

Traditional brokers 

The full-service brokers or traditional brokers tend to be the oldest brokers present within the financial market. They normally carry out more than merely performing the role of an agent to complete the process of trading. Their services as well undertake the correct research of the market trends to provide essential suggestions to the investors who put in their money in the stocks. Very frequently these houses as well as provide margins loans also to some investors to buy investment on credit that will be regulated by proper terms and conditions.

Discount brokers

Online brokers or the discount brokers realise from the investors relatively lower fees than the full-service brokers. The reason responsible for taking cheap commissions is that they allow the investors to execute a trade through a computerised system of trading or automated one in place of a real stockbroker making possible for them the process of trading.

The method that they utilise to provide such inexpensive services is that the discount brokers in India carry out orders merely sometimes within a day. They, first of all, collect orders that are being produced by a big group of the small investors in a single block trades that are created at some particular times in a day.

Below are stated a few advantages of using a discount broker as opposed to the full-service brokers

1-A discount broker will not provide any kind of trading suggestions, but they make the possible process of trading for cheap commissions in comparison to a full-service broker.

2- The investors or traders in the stock market who sell and purchase financial securities by using discount brokers bank a hefty sum of money on deals and commissions that add to their capital that they are capable of investing in trade and make extra money.

3- Frequently the investors are required to stick to their position for some extra time, the need for it is to make up for huge commissions. Sometimes the discount brokers with vested interests sell specific stocks to make considerably high commissions.

4- A few discount brokers provide educational tools also to assist the traders and investors take the correct decision regarding investment.

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