About Stock Trading Brokers

Stock trading brokers are professionals who are licensed to handle stock transactions as opposed to stock traders, who may or may not be professionally licensed. Brokers must pass a series of tests called the General Securities Representative Exam, which is also known in the industry as the Series 7 Exam. This exam is given by the Financial Industry Regulatory Authority to all potential brokers and is used to maintain industry standards and integrity. Anyone wishing to trade on the stock market exchange is required by law to use a licensed stock broker or licensed brokerage firm.

Stock trading brokers usually work in conjunction with a stock brokerage firm or a financial investment company. Brokers handle the day-to-day business of the firm such as offering clients investment advice, maintaining client portfolios and managing investments on behalf of the company. Besides those duties stock trading brokers work on the floor of the stock exchange, buying and selling stocks.

Function

The main function of a stock trading broker is to buy and sell stocks for individuals or companies. After discussing investment options with a client, the stock trading broker will take the client's order to sell or buy certain stocks at a specific price. The broker will then contact another broker who is working on the floor of the stock exchange and give him this order. The floor broker makes the transaction and relays the sum of the sale back to the initial broker. After the money has between transferred between the buyer and seller, the broker takes care of all the legalities involved with a trade such stock title transfer and other paperwork. The broker either takes a fee or a percentage of the sales as his commission.

Types

Stock trading brokers can also work as investment and financial advisers. Some brokers work as stock traders and as advisers; others work strictly as traders or advisers. Brokers who are investment and financial advisers work with clients in handling and planning their investments. Investment brokers can work in simply an advisory role, explaining to clients their various options in the market, or they can work as a legal representative of the client, making investment decisions and then carrying them out on behalf of the client. As with the straight broker, a broker adviser charges the client a fee for his services or takes a percentage of the client's profits.

Benefits

Since the advent of stock trading opportunities on the Internet, individuals are now able to make stock investment decisions on their own without consulting a stock broker or brokerage firm first. While the actual financial transaction is still handled by a licensed brokerage, investors are able to decide what stocks to trade at home and order the transactions over the Internet. While this system may work fine for experienced stock investors, there are many benefits that come from using a stock broker.
Stock brokers can offer valuable inside information regarding stocks and the companies that trade on the exchange. Brokers also have years of valuable experience in trading and investments. Brokers also handle all of the legal aspects of stock trading and provide investors with a detailed log of all transactions for tax purposes.

Misconceptions

One of the most common misconceptions regarding stock brokers is that their services are expensive and that they only handle rich clients. While there are some stock brokers who specialize in wealthy clients, the majority of brokers have more median-income clients than wealthy ones. All of the major stock brokerage firms have plans tailored to meet the needs of all types of investors from large corporations to individuals who wish to set up a retirement account.

Warning

For the most part stock brokers are ethical and abide by the rules and regulations of their industry, but it's always wise for to be aware of potential trouble. Five of the main warning signs of stock broker fraud are: trouble reaching your broker either by phone or e-mail; not understanding your transaction statements and the broker's explanations are vague or dismissive; sudden unexplained changes in your portfolio; unauthorized transactions on your financial statement; and failure by the broker to place transactions that you have ordered. If you become suspicious of stock broker fraud, it is best to contact an attorney who has expertise in the financial industry immediately