How do Stock Brokers work?

In ForexSQ we know that probably the best and fastest way to invest in the stock market is to do it through a stockbroker. Once an account is opened, the investor finds himself in a world of multiple trading and investing opportunities. However, opening an account is perhaps the easy part. The hard work takes place before, first when you have to choose the broker, and then when you start buying and selling equities.

A stockbroker brings you multiple opportunities. You can buy or sell stocks or any kind of financial asset. Opportunities go from buying Apple stocks to shorting Ford options. Also, most stockbrokers allow you to invest in currencies, commodities, bonds, rates and more. You can be an active intra-day trader, dedicating yourself 100% to the task, or be a daily trader who programs operations once a day or a long-term investor that trades once in awhile.

You can use fundamental or technical analysis as an instrument for trading. Another possibility is to contract a service that provides you with price signals. Whatever you choose, the key is your attitude toward your trades. Is the decisive point. Being a disciplined trader is what could make the difference between success and failure, between gambling and investing.

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Risk management. Brokers won’t do it for you.

The stockbroker is a company that provides you a service, executing buy and sell orders, you ideally use it to obtain a return on an investment (earn money) but you can also lose money. Risk management is crucial and is up to the investor. It becomes practically essential, particularly if you deal with leverage, an instrument that allows you to increase the potential of your gains (and also your losses). The broker sets leverage limits but is the investor who deals with it.

At some point, when a trade goes badly, you will be tempted to blame the market or the brokers. When you point your finger to others but yourself for a trade that went wrong, you are probably wrong. Usually, brokers’ trading platforms work without problems and without trying to make you lose money. But sometimes they could experience malfunctioning or strange things could happen, usually under extreme market circumstances, like in low volume hours when spreads can explode, triggering a stop loss, that is reached for only a second just before price bounces back into the opposite direction. Experience can help a lot in order to avoid these circumstances and also it would help you know when you have to make a complaint to the broker and when not to.