What is a broker? Definition & Meaning - nextmarkets Glossary

Last updated: 23.01.2020
Richard Adcock
Author:
Richard Adcock
Adviser
CFD & Trading
Experience
> 30 years

When you set out on your journey as an investor, the broker you work with will be the primary relationship you have and will answer questions such as “what is a brokerage?”. This will be the case whether you work with a stockbroker, futures broker, commodities broker, bond broker and more. This guide for the aspiring investor explains what a broker is and gives you an overview of how nextmarkets fits in.

This is all part of the nextmarkets commitment to being the best online broker for supporting the development of new investors. New investors may want to consider trying social trading (see social trading definition & meaning).

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What is a broker? The definition

A broker is a professional person who facilitates ‘buy’ and ‘sell’ orders on assets like CFDs (see: what is CFD) on behalf of their clients for stocks and other such assets either over the counter or in a listed market. This service is usually provided either for a set fee or for a commission of all profits the asset makes.

In most cases, a broker will be associated with a brokerage firm and will handle transactions for both retail customers and institutional ones. In some cases brokerage firms, as an entity, are referred to as brokers. But one noticeable drawback of some discount platforms is the lack of a truly personalised service that a dedicated broker offers. For a detailed guide, see our Broker for Beginners section.

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Expanding on traditional brokerage definition

A large proportion of modern brokers and brokerage firms are leaving the old traditional brokerage account behind. Instead, they are opting to offer a new model, known as an ‘asset management account’. It may sound complicated, but it is actually designed to reduce the complications for the client.

If you hate tedious paperwork, like to have comprehensive, detailed statements and prefer the idea of paying a flat percentage of your overall account value rather than frequent commissions, an asset management account may be right for you. And with the nextmarkets online platform (see: what is trading), this is exactly what you get.

What is an online broker?

An online broker is primarily focused on providing you with the tools you need to trade by yourself in markets like Forex (see: What is Forex). IIn forex, there are a number of things to consider, such as forex signals, the forex calendar,forex indicators, and forex trading hours.

You will take responsibility for handling the buy and sell orders. This will alleviate the gnawing question, “what is the best online broker for beginners?”. The online broker can be ideal for professional/experienced investors who like to manage their own money, as they won’t have to pay for services they don’t really need. Plus, newcomers to investing get tons of training/education resources. At nextmarkets, we are working tirelessly to be the best online broker UK investors could hope for.

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How to become a broker with nextmarkets

Brokers are among the most important parts of any market. Their role is integral in bringing together buyers and sellers to facilitate the transactions on products such as CFD stocks Becoming a broker is a challenging but worthwhile journey, which starts with education and training in fields like accounting, business, finance and economics.

You then gain experience, perhaps through an internship, then find a sponsor to take the exams to become licensed. Once you have the necessary licences, you can begin working in a brokerage and reap the rewards this booming industry has to offer. If you have the skills and work in the right brokerage, you can have an extremely lucrative career as a broker.

Fact Check

When you trade with nextmarkets, you will feel like you are working with your own personal broker who supports you at every turn. By joining you can take advantage of a range of benefits, including:

  • The best demo platform in the business
  • Low margins and high leverage rates
  •  Competitive spreads

This is why we’re so highly rated in broker comparison searches.

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Receiving confirmations from your broker

When you buy or sell any investment via your broker account, you will receive an official document called a ‘trade confirmation‘ from your broker. There are certain items on every trade confirmation you receive that must be checked because if an error occurs and you don’t check your confirmation carefully, you could end up making some significant losses. The trade confirmation is often mailed to you, or you may receive a PDF version if you have opted for paperless delivery. For more tips check out our Broker Strategies section.

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The importance of broker trade confirmations

A trade confirmation is a vital document to verify that the broker’s actions regarding a specific order were fully compliant with your instructions. If you spot any information that you believe is an error on the part of the broker, you must make immediate contact with them or your bank to get it corrected.

It is strongly advised that you keep a record of all your trade confirmations, including all your day trades (see: what is day trading), as they are very useful when it comes time to handle your taxes. And if you are ever subject to an audit, they will form part of the required documentation.

nextmarkets' online broker guide UK

There are two main types of broker in the investment world: traditional full-service brokers and online brokers. There are pros and cons associated with each, and it is important to understand them in order to choose the right one for you. When you start an account with a traditional broker, you get to work with an individual who can act as your own personal sounding board.

This person may offer investment recommendations based on economic indicators and help you set things up that require a little expert knowledge, in exchange for a commission from your earnings. An online brokerage won’t revolve around an individual who is trying to leverage your profits to earn for themselves, but at nextmarkets, you get access to all sorts of support, tools and resources to help you succeed.

Learn how to trade with nextmarkets

The alternative to an online broker

If you’re willing to pay higher fees, you can go with the more conventional full-service broker. As they charge these higher commission rates, full-service brokers often include helpful additional services. For example, they might offer you a tailored list of potential investments based on your preferred investment strategy.

So if you have a preference for shares with stable companies that have increased their dividends year upon year for 25 years, your broker can prepare a report that lists the names, ticker symbols and a dividend yield of every public company that meets your criteria. Furthermore, he or she might draw up reports about your portfolio, giving you a run-down of how your investments are performing and perhaps even help you gain access to certain funds that you otherwise would be unable to purchase.

The benefits of online brokers

The nextmarkets platform offers the online broker account investors need to empower themselves in a wide array of investment markets. There are many benefits of online brokers over the old-fashioned, conventional broker. The advantages of using an online broker include:

  • Unlimited cheque writing with money swept into markets, helping to generate more income via interest.
  • A monthly consolidated statement that enables you to easily keep track of your financial activity.
  • Some firms will enable you to consolidate asset management accounts with a combination of both traditional brokerage and discount models.
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nextmarkets broker glossary

You will find that the world of the broker is filled with jargon and terminology, far too rich to cover in a single paragraph. But there are some key terms you’ll want to be familiar with, including learning the difference between a discount and full-service brokerage.

Asset allocation is a strategic term, and you’ll want to learn the differences between stocks, or shares (see: what are shares?) and bonds. You’ll have to understand cash and cash equivalents, as well as mutual funds and exchange-traded funds (ETFs). Other important terms to familiarise yourself with include capital gains, commissions and cash accounts / margin accounts.

Avoiding exorbitant brokerage fees

Some of the fees associated with brokers and banks are absolutely outrageous yet shockingly common. It would be beneficial for you to spend a little time educating yourself on fees so that if you come across a broker that issues these outrageous charges you can take your business elsewhere. One of the most common of these types of charges is the custodial fee or ‘safekeeping’ fee. This refers to a broker acting as a custodian, safeguarding securities for their clients.

In some cases, the fees associated with this service are quite fair and not a cause for concern, but if they are too high then it may be worth looking for an alternative broker with less exorbitant fees. With the nextmarkets online broker app, we always go the extra mile to ensure the cost to our customers is minimised.

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Did you know

At nextmarkets, we are committed to making you a successful trader in the long term. That’s why we put safety measures in place for you, like:

  • Deposits up to 20,000 EUR are covered by the Malta Investor Protection Scheme
  • Enabling you to get started with a balance of just 500 EUR

Register for free today.

Broker terminology

There is much to gain from entering the world of investing, so long as you are prepared to do the work to learn how to succeed. One of the fundamental things you will need to do is to is learn your way around the financial jargon you are likely to encounter once you open a brokerage account.

Think about it – precisely what are stocks?. At nextmarkets, we are committed to helping our customers achieve their potential and succeed in the investment world, so we offer plenty of training and resources to help you get to grips with broker terminology. Dip into our platform with a demo account and see for yourself.

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Online broker meaning

Digitisation has driven great change in the world of investment, and we recognise that clients want a simple, transparent and inexpensive way of trading. This is what the nextmarkets platform aims to deliver, and we are constantly developing our practices to be the best trading broker UK aspiring investors could hope for.

If you would like to take advantage of this groundbreaking platform you can register today and see for yourself what we can do for you. And as technologies continue to develop and evolve, there will always be improvements to online broker software, and you can rest assured nextmarkets stays on top of the latest technologies to deliver a comprehensive, cutting-edge platform for your clients.

An online broker defined for professionals

We want to see people graduate from training through their demo account to trading for real on the markets. And for a select few, we offer the nextmarkets Pro account that offers lower margin rates and gives you a dedicated customer support team. To qualify as a professional you need to satisfy at least two of three specific criteria.

Your trading frequency must exceed 10 transactions of significant size per quarter, or your portfolio needs to exceed a total value of more than 500,000 EUR. Having expert knowledge, perhaps from working in finance, in derivatives trading is another possible option. We love to see our clients progress to this level – it shows we are doing the job we set out to do!

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nextmarkets: a new type of online broker

nextmarkets is the stock exchange coach, analyst and trading platform that gives you unprecedented levels of training and control to get the most out of your investment portfolio in the modern climate. We aim to help our clients act on the stock market with knowledge and preparedness, rather than emotions and greed.

Our platform enables you to try a fully interactive broker demo to get to grips with all the ins and outs of the nextmarkets service. You’ll learn why we’re the best choice for the future of your investment. And, for an added level of convenience and security, we are proud to be a leading online broker PayPal payment options, rounding off our feature-rich service.

Is a broker absolutely necessary?

If your objective is to purchase stock in a specific company, it may be possible to make an investment without the support of a broker of any kind. There are special types of affordable programmes called ‘direct stock purchase plans’. But in the modern climate, there really isn’t much of a reason to seek to avoid opening an account with a broker.

If you invest through nextmarkets, the trading costs and commissions you face will probably work out less expensive than a trip to your local coffee shop. You’ll also be able to take advantage of exclusive trading options, like swing trading (see: what is swing trading?). And you will get plenty of support to fulfil your potential as an investor.

The best in online brokerage

If you really want to sink your teeth into investing and trading, but don’t feel ready to start putting your own money at stake, our free demo account is perfect for you. nextmarkets primarily focuses on developing our clients into the type of trader or investor they want to be, and through our demo account, you can get a real taste for what the markets are like.

Registration is easy, and you’ll also get a feel for the nextmarkets platform, along with all the additional tools and resources we offer. And with a wide range of online broker payment options you will never have any problem making secure, seamless transactions when you trade through us.

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