The five types of broker businesses I – The basics

Jun 2017

We talked about the advantages of handling your money on your own and looked into the differences between investing and trading. This information is crucial to find your broker because it helps to discover yourself. The other side of the coin are the brokers. Let’s investigate them in detail.

There are five types of broker businesses you should understand

This is how I would explain it to my pal:

  • Live brokers are guys on the phone taking your order. They can help you a ton, but it is very hard to find a good one. What’s more, they usually cost more than what they worth.
  • Online stockbrokers are homepages where you can buy and sell stocks. If you want to start to invest or trade, start here. As you get more experienced, you might want to do something fancier than stocks. Some brokers will be able to accommodate your needs, some not.
  • Betting brokers are also online broker platforms. You can bet on whether asset prices will go up or down without buying the stock. It is just a bet. Betting brokers are like knives. Could be useful, but if no idea how to use, you can cut yourself.
  • Forex brokers or FX brokers are online platforms specializing in trading currencies. These firms advertise hard, but you should think twice before trading currencies. FX is one of the most difficult markets to trade, and you can easily lose your money.
  • Binary options brokers are the next bunch. And they are dan-ge-rous. If you are no pro, just leave them. Here is how it works. Let’s say Coca-Cola trades at 45 USD. A binary option means you bet 60 USD. If Coca-Cola share price goes above 50 USD, you win 100 USD. If the price stays below 50, you get nothing. Binary options are complex products for beginners. Furthermore, a lot of binary options brokers are scams. Please don’t do it.

One broker firm can run several broker type businesses. It is a bit like running business lines. E.g a company can run live and online stockbroker business at the same time.

Ok, these were the basics. Now, let’s see what aspects should you consider before making the final judge.