What’s the Difference Between the Trader and Broker?

Although both traders and brokers buy and sell shares, brokers also act as sales agents. Traders, in contrast, work mainly for large investment companies, sell and buy securities with the organization’s money. So what is the difference, and how can a novice investor create a trading account?

To understand the difference between a broker and a trader, first, let’s see what they do and how they make money, and then we’ll summarize all the information about traders and brokers together.

Traders vs Brokers

A trader is a person who makes money on the natural difference in the price of a product, which is formed without their personal participation. In other words, they make money on a price increase that occurs without the added value of the product. Stock traders are the most common type of trader among all other traders.

A broker is a participant in stock trading, performing mainly intermediary functions in the implementation of various transactions and receiving remuneration for this from the participants in the relevant contracts. The broker’s task is to conduct a transaction within the framework of legitimate mechanisms and in full accordance with the wishes of the customer. In addition, traders turn to brokers in order to get assistance in finding buyers and sellers of certain assets at an acceptable price. In this case, the broker who is able to find the right partner usually receives a significant percentage of the transaction.

Once again, what’s the difference?

Summing up the trader/broker difference topic, these are the main points:

1. A trader buys and sells currency (or other securities). A broker does not buy or sell anything, they only provide intermediary services. Even in the dealing centers, the initiative to buy or sell comes from the trader, and the broker provides liquidity services;

2. The trader makes money on the price difference. Therefore, the trader needs to buy a product at a low price and sell it at a high price. Otherwise, the trader will not receive profit. The broker earns a percentage of the trader’s volume of transactions. Therefore, the broker only needs traders to trade;

3. If a trader buys a product at a high price and sells it at a lower price, then they’ll have losses. And the broker will not have any losses. The broker will earn in any case on the percentage of the trader’s deal. That’s why brokers are often not too concerned about the professionalism of traders. Brokers are ready to serve students and retired traders without any examination;

4. There is no competition between traders in dealing centers since a broker has a large enough reserve of currency to provide liquidity. Therefore, in dealing centers, traders do not compete with each other about buying goods faster at a better price. On the other hand, there is a very tough competition between brokers to attract traders, since a broker’s earnings depend on the number and volume of traders’ transactions.

How to Get a Trading Account?

Newbies who want to make good money do not know which account is better to open. The types of Forex accounts are different, they all differ in terms and conditions.

Demo account

Before starting real trading, you need to practice on a demo account for several months. Each broker provides an opportunity to trade on a demo account and hone their skills. The difference between a demo account and a real one is that there is no risk of losing your funds since you are managing virtual money.

Standard account

This is a real account where you put real money and risk it in real trading. Usually, the spread is fixed, but it all depends on the choice of the broker; different forex brokers offer different terms.

Cent account

If you do not know which Forex account to open, because you want to trade on a real account but are afraid that you will lose money or do not want to invest a significant amount, you can choose this type of account. It is good for beginners and differs from a demo account in that you trade quite realistically, you can feel the emotions that arise only during real trading. However, at the same time, you do not risk money, since the loss of 5 or 10 dollars will not greatly affect the financial condition and is quite acceptable. Many novice traders switch to a cent account from a training account precisely to get adrenaline from the trading process itself.

These are the main types of Forex accounts available to traders. When choosing your new broker and creating an account, pay attention to companies’ ratings and browse through the reviews of their current and past clients.

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