What is a Broker? – Definition, Functions, and Specializations

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When discussing topics around stock investing, forex and others, we often hear the term broker. The role of brokers is very crucial in the investment business, they are business partners for investors.

If you want to invest (in stocks, forex, etc.), the first step is to determine the best broker.

In addition, it is good to choose a broker who has a good and user-friendly online application.

You can try using dummy-trade to assess whether their investment application is quality or not.

Broker Definition

what is broker

A broker is your business partner who acts as an intermediary between the capital market and investors.

As we know, the exchange of securities can only be done by someone who is a member of the exchange of securities. Independent traders need help from exchange members and they are brokers.

Brokers offer services and receive compensation from commissions, fees, and exchange payments in accordance with the applicable agreement.

Apart from carrying out trading activities on the exchange, the broker will help you carry out analysis, planning, and research to ensure that the client’s transactions are smooth and safe.

Hiring a broker is not cheap, only certain investors can use this service. However, the rapid development of technology has made everything easier. Now anyone can call a broker at a more affordable price online.

In general, brokers earn their income through fees based on transactions between sellers and investors. On the other hand, there are brokers who take profit from the difference between buying and selling investments.

Also Read: 8 Best Long-Term Investment With Example

Basic Broker Duties

In addition to executing client orders, brokers can provide investors with research, investment plans, and market intelligence.

They can also cross-sell other financial products and services that their brokerage firm offers, such as access to private client offerings that provide customized solutions for high net worth clients.

In the past, only the rich could afford to use the services of a broker and access the stock market. Online brokerage fueled the discount brokerage boom, which allowed investors to trade at lower costs, but without personal advice.

Broker’s Role in Investment

Forex or stockbrokers offer facilities that make it easier for traders to trade online. Some of the facilities provided by the broker are:

  • Leverage

Especially for forex trading, the broker has a leverage feature for traders. This is useful so that the funds needed for forex transactions can be reduced – this is very useful for beginners who are just starting their forex careers because they do not need to spend a lot of capital when practicing.

  • Online Trading Platforms

Thanks to technological advances, brokers have their trading platforms or software. This allows investors to buy and sell online. Trading stocks and forex is now easier because we don’t need to contact the broker via telephone.

  • Forex Analysis Tools

Forex analysis tools are very important to execute an objective trading strategy. Forex analysis tools are already included in trading software such as Autochartist and MT4. Traders can finally manage their own trading strategies.

  • Choice of Financial Instruments

In facilitating the trading of financial assets, brokers provide not only forex but also indices and commodity futures. However, many forex brokers facilitate the trading of CFDs as well as for cryptocurrencies.

  • Payment method

Most brokers have withdrawal and deposit features – this can help traders deposit and withdraw funds easily from individual accounts. Some of the well-known payment methods are Bank Wire, credit cards, e-payments, and cryptocurrencies.

  • Become an Advisor

There are several stockbrokers who run the stock business on the basis of mutual trust. You can choose a stockbroker that provides this service if you are new to the world of capital markets and don’t understand how the capital market works.

The world of capital markets is high-risk, so with a broker, investors will not struggle alone. Brokers can help in making investments.

Types of Brokers

what are the functions of brokers

  • Retail Broker

Retail brokers or retail brokers serve consumers who are retail investors. On every buy or sell transaction, the retail broker receives a commission if you do it on the customer’s instructions.

  • Full-Service Broker

This broker has a full service, they provide reports on analysis results, provide information, and carry out investor transaction instructions and manage investor accounts. This broker is suitable for investors who are busy and do not do market analysis. However, the commissions to be paid are also very high.

  • Deep Discount Broker

This broker offers a simple service that only executes buy and sell orders and manages consumer accounts. The commission payable for this type of broker is much lower than for a full-service broker.

  • Discount Broker

This broker does not have full service. They make buy and sell orders according to the direction of investors, but also have suggestions in the form of analytical reports or the latest information.

In general, investors who use the services of this broker already have basic knowledge of the capital market. The cost of this broker is still cheaper than a full-service broker.

  • Online Broker

Online brokers work online with a service system like conventional brokers. With the advancement of information technology, online brokers tend to be favored by young people.

Because the process is via the internet, transactions can be carried out freely and freely. The commission that investors have to pay is also relatively cheap compared to conventional brokers.

Also Read: 6 High-risk Investment Mistakes according to Warren Buffett

Choosing the Best Forex Trading Broker

Here are the names of forex brokers who have a reputation and good name in the broad market:

  • Exness

Currently, the Exness group offers a wide range of financial instruments, including currency pairs, metals, cryptocurrencies, energies, indices, and stocks. Their growth is very stable, led by the systematic improvement of trading conditions which is the key to the success of their company.

  • Pepperstone

This is a foreign exchange originating from Australia that has gone online since 2010. The company itself belongs to the STP and ECN forex brokerage groups. Pepperstone itself is officially regulated by ASIC.

  • Yadix

They are forex brokers that provide the main facilities to accommodate scalpers.

Yadix does provide complete facilities that pamper scalping activists so that they can activate market analysis and exit quickly to get constant small margin opportunities.

  • Tickmill

Tickmill itself is a forex broker that offers MT4 and MT4 web trader currency trading platforms. They themselves provide up to 60 currency pairs, gold, silver, bonds, and CFDs for personal investment and trading options.

  • Instaforex

This company has a head office headquartered in Russia and they have been created since 2007 ago. Currently, InstaForex is the main choice for more than 7 million traders, this is such a fantastic number.

  • OctaFX

It is also one of the forex brokers with high popularity. They are an international forex broker favored by our domestic traders, Indonesia.

  • XM

Founded in 2009, XM has grown into a giant and robust international investment company. They are also a high-end company alongside many other rivals.

  • FBS – Finance Freedom Success

It is an international broker that has branch offices in more than 190 countries, Indonesia is also included. Currently, there are more than 14 million traders and 370 thousand partners who are active as FBS forex brokers – this is extraordinary. The total annual revenue of FBS clients reaches 500,000,000.

How to Become a Broker?

Like many professionals in finance and business, successful stock or forex brokers have strong strategic thinking and communication skills. These professionals guide their clients on which stocks to buy and answer investment questions relating to risk and reward. They must also have sales skills for selling shares.

Some job listings and websites may refer to stockbroker positions with different job names, such as securities, commodities, and financial services sales agents all completing the same job responsibilities as a stockbroker.

According to PayScale, stockbrokers earn more as they progress in their careers. For example, an entry-level stockbroker earns a median annual salary of $46,382, while a stockbroker with more than 20 years of experience earns $99,090.

Prospective large corporate stockbrokers need at least a bachelor’s degree and must pass a series of exams administered by the Financial Industry Regulatory Authority (FINRA). However, professionals with additional education, such as a master’s degree, can enjoy more success selling stocks, because clients trust them more.

How long does it take to become a stockbroker? It takes at least four years to earn a bachelor’s degree to become a stockbroker. Some stockbrokers may choose to earn a master’s degree in business administration to enhance their credentials.

Also Read: Infographics: Warren Buffett advice to financial, social and Investment you Need to Know


Regardless of what field a broker is in (forex, stocks, real estate), a broker is a person who helps you buy something from a third party. They are educated and licensed intermediaries that make it easy for those of us who are not trained in the industry to buy a product.

If you use a broker, make sure you know in advance how much they charge. They generally earn a commission based on how much money they spend.

However, you will want to know exactly how they are paid. This will prevent surprises about how much you will have to pay them. In the case of insurance brokers, it will also notify you if there is a potential conflict of interest that might lead your broker to choose a more expensive product for you, even if you don’t need it.

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