Anyone who has traded stocks or done any kind of trading for that matter will know that a brokerage and a broker are inevitable components of this process. Even today, as trading becomes digital and you as an investor have direct control over your trades, the role of the broker cannot be discounted.

In fact, a great way to make money through trading without actually risking your own money is to perform the role of a broker. However, it is not as easy as simply knowing how to read a few charts and executing trades.

Definition of Brokering

The term “brokering” generally refers to the act of serving as an intermediary between two or more parties to facilitate a transaction or agreement. In the financial world, a broker is an individual or firm that acts as an intermediary between an investor and a securities exchange.

Brokers are necessary because securities exchanges only accept orders from members of the exchange, so individual traders and investors need the services of these members to execute their trades.

They can be categorized into two main types:

Discount brokers: They execute trades on behalf of a client without providing investment advice. They usually charge little or no commission for trades, making money based on volume and lower costs.

Full-service brokers: They provide a range of services including market research, investment advice, retirement planning, and more, in addition to executing trades. They typically charge higher commissions for their trades and may offer tailored solutions to high net worth clients.

Brokers must register with regulatory authorities like the Financial Industry Regulatory Authority (FINRA) or the U.S. Securities and Exchange Commission (SEC), depending on their role and the services they provide.

There is quite a lot of study that goes into this profession not to mention the formal qualifications that you need to secure the job. However, it is a promising profession even as a digital broker and there are a number of avenues through which you can earn.

1.  Knowledge

It is your job to know what is happening in the stock market or the market that you are trading in and to be financially literate. At a basic level, brokers only help you carry out the trade but the best in the business is nothing short of financial advisors. You need financial knowledge to be a good broker, coupled with the necessary training and even degrees.

Many brokers in the business might have degrees in law or philosophy but it is their ability to learn and acquire knowledge that makes them top candidates. It is a very open-ended profession but you need to be able to demonstrate your knowledge.

2.  Platforms

Traditionally, brokers were people you would find at the local stock exchange with telephones taped to their heads and their eyes glued to a screen. Today, they still have telephones and screen addictions but they can be on a sunny beach enjoying a margarita while they make money. However, their lifestyle is not an indicator of whether or not they are a secure trading option, for this, you need to trust the platform they represent.

There are a number of traditional brokerage houses that you can work with and also a number of well-reputed online services that you can use. Online services don’t always provide a dedicated agent and that is an additional service you will pay for.

3.  Salary And Commissions

They make their money through both a very salary and commissions on the trades that they execute. More importantly, their commission is based on the value of the trade, the amount of input they have on the trade, and the kind of commodity they are trading. Perhaps the most valuable asset that they have when it comes to making money is access to markets and knowledge of the marketplace.

If you are considering trading online then there are quite a few free brokerage options. If you are considering pursuing brokerage as a profession then this is something you need to research and finalize what you want to specialize in. Just like any other profession, the more specialized you are the higher you can charge and the more space there is for growth.