Brokers and traders – who is who?

People who don’t know Forex are often confused in terms such as a broker and a trader. So broker and trader, what’s the difference? To understand the difference between a broker and a trader, first we will check what they do and how they make money, and then summarize all the information about traders and brokers. If you are looking for broker than check some info at Forex Broker FX.

Trader  – in the narrow sense of the word, it is a person who trades on the stock exchange. Moreover, he can trade as a businessman, with his own money or with the money that investors have entrusted to him. Or he may work as a hired trader for a salary, for example, in a bank. In this case, his employer trusts him with his money and all profits go to the employer, and the trader is paid a salary.

There are situations when a trader can work as an employee and at the same time receive a percentage of the profits and simultaneously spin his own money. The majority of traders work for their money as businessmen. Or rather, they use this type of business for a part-time job in order to have additional income to their main job (both as an employee and a small businessman). The fact is that it is quite risky to make exchange trading as your only job. Therefore, it is always necessary to have what is called a “alternate aerodrome”. Below, we will see that, unlike a trader, a broker’s job is more reliable, but the broker has other serious problems.

So traders are those people who sell and buy different currencies, stocks, futures, options, metals, raw materials and other commodities on the exchanges. The task of the trader is to buy goods at a low price and sell at a higher price. And since the price movement up and down does not depend on the personal involvement of the trader, the work of the trader seems to be not entirely simple and not everyone has professional competence in the trader’s profession.

A broker is an intermediary who performs certain operations on the orders of his client and receives a predetermined fee from the client for this. Please note that just as the notion of a trader is both in the broad sense and in the narrow sense of the word, the notion of broker can also be in the narrow and broad sense of the word. In the narrow sense of the word, the term broker is understood only as a stock broker, who performs trading operations on the stock exchange on the orders of his client (trader).

In addition to stockbrokers, there are still lots of other brokers. For example, a customs broker on the order of his client submits documents to customs for passing goods through customs. Or, for example, a credit broker, on the orders of his client, finds loans for a client with acceptable credit terms. Well, and with real estate brokers, realtors, probably, many people came across personally or heard a lot about them.

Stock brokers are intermediaries between traders. Suppose a trader wants to buy one million euros for his dollars. The broker of this trader must find another trader, one who, on the contrary, wants to sell his million euros and get dollars for it. If the broker found such a trader, then he acts as an intermediary in price negotiations that would suit both parties. Just like, for example, an ordinary realtor when buying and selling an apartment. Also, as in real estate transactions, the broker can find quite complex options, such as several euro sellers, who have a total of one million euros. Forex Broker receives a certain percentage of the amount of the transaction between traders and therefore it is in his interest that the transaction be completed as quickly as possible.

Broker on the stock exchange earns a certain percentage of each transaction. This percentage is called a commission. The trader pays a commission, both when buying a product and when selling a product. Please note that the trader pays the broker a commission in any case, regardless of whether the transaction was profitable or unprofitable. Therefore, the broker makes money even if his client suffers losses and goes bankrupt.