Frequently Asked Questions on Stock Broking and Stock Brokers

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Are stock brokers regulated? ^^^
Most developed nations have a government regulatory body that supervises, oversees and controls the activities of stock brokers. The Australian Securities Commission and the NASD (National Association of Securities Dealers) in the United States are examples.
Can anyone be a day trader? ^^^
Under the rules of NYSE and NASD, customers who are considered "pattern day traders" must have at least $25,000 in their accounts and can only trade in margin accounts.
Can my broker buy or sell any stock I order him to? ^^^
In theory, any registered broker can buy or sell any stock that is traded on a stock exchange. However, some stocks may be very thinly traded and he may not be able to execute that trade, especially if you have given him a limit order or a stop loss order.
Do stock brokers have to be licensed? ^^^
Most countries have some requirement for the licensing of stock brokers. In the United States, in order to buy or sell stocks, one must register as a representative of his firm with the National Association of Securities Dealers, Inc. (NASD) and to do so must pass the General Securities Registered Representative Examination (Series 7 exam), administered by the NASD. Most States also require a second examination, the Uniform Securities Agents State Law Examination.
Do stock brokers have to have specialized training? ^^^
Stock brokers must be knowledgeable about general economic conditions and trends, and so usually have a college education. A degree in business administration, economics or finance is typical. Many stock brokers also take courses to prepare for the securities examinations, and are usually encouraged by their firms to take additional licensing exams so that they can to sell products other than stocks, such as mutual funds, insurance, and commodities. Stock brokers must also follow the day to day trends regarding the stock market, interest rates, politics and other news that will affect stock prices.
How are stock prices set? ^^^
Most of the things you buy have prices that have been set beforehand by the seller. Prices on the stock market, however, operate more like in an auction, in which buyers list what they are willing to pay and sellers list what they are willing to receive. If you are a buyer, your broker will find a seller who is willing to sell you that stock at the price you specify.
How do I decide on the best stock broker for me? ^^^
You need to compare commissions and other fees, what your initial deposit must be, the customer service reputation of the brokerage house (from friends and other contacts, or from internet discussion boards), other services they may offer that appeal to you (many brokers now offer traditional banking services), how much research they do on your behalf and what kind of products they deal or specialize in.
How do I get in contact with a brokerage company if I am interested in buying stocks? ^^^
Decide on what kinds of stocks you are interested in (the sector, for example drug stocks, or stocks in insurance companies) and how much you want to invest. Different brokerage firms may have minimum investment requirements. Internet research will allow you to compare the commissions and fees for as many stock brokers as you want. If you feel you would like to do your own research, you can save money on trades by using a discount stock broker, or you can pay more and get more service from a full service stock broker.
How do I know I am getting the best price for a stock I gave a buy or sell order for? ^^^
Most firms use automated systems to process the orders they receive. This automation, to a certain extent, means that each order will be processed as it is received. However, since a broker has to evaluate the best execution for each trade and examine which competing markets offer the most favorable terms of execution, he should try to take advantage of "price improvement", which is the opportunity, but not the guarantee that an order to be executed at a better price than the currently quoted price. In doing so, the broker also has to consider other factors such as the speed and the likelihood of execution.
How do online stock brokerages function? ^^^
Online stock brokers offer trading through the internet. Today, most brokerage firms offer investors this service. An online stock broker will maintain a website which customers use to enter orders in a real-time system. Use of online trading lowers the handling costs and therefore the commissions charged tend to be significantly lower than for traditional stock brokers.
How does a stock broker operate? ^^^
A stock broker can work in two different ways. He may have a group of clients and he recommends stocks that they should buy, or clients may call him and request that he buy a stock (place a trade) on their behalf. Stock brokers are paid a commission, so a conflict of interest can arise when a stock broker offers his/her service as a financial planner, because their revenue is generated as a direct result of their recommendations to you.
How much will the stock broker explain about a given stock? ^^^
If you are working with a full service broker, you should be able to get as much detail as you like about a prospective stock. In addition, some brokers have been directed to recommend certain stocks because their commission may be high on that stock, so they will have ample detail in order to convince you to buy.
How quickly does a trade occur? ^^^
Whether you trade through online brokerage accounts or call your broker to place a trade, the same process takes place. The execution of a trade execution may seem instantaneous, but it does take time. Prices change quickly and since price quotes are only for a specific number of shares, an investor may not necessarily receive the price he saw on the screen or their broker quoted. No regulations require a trade to be executed within a set period of time, but most firms boast about their speed of execution in order to attract customers, and they need to keep to that promise of loose customers.
Is my stock broker limited to buying and selling on a stock exchange? ^^^
In addition to the various stock exchanges, there is a decentralized market of securities not listed on any exchange. This is called the over the counter (OTC) market and participants trade over the telephone, facsimile or electronic network instead of on the trading floor of an exchange. Your broker can buy and sell stocks that are listed on the OTC market as well as on the stock market.
What can I expect from my stock broker? ^^^
That will depend on whether you are working with a discount broker or a full service broker. The level of service should be agreed upon when you open the account. If you plan on doing a great deal of your own research, you will pay a lower commission per trade. You also have to advise your broker if you want him to recommend stocks.
What do I have to do in order to start working with a stock broker? ^^^
Once decided on a stock broker, you'll have to open an account with that firm. This normally only requires filling out an application. As long as you are not asking to open a margin account (an account that lets you to borrow money from the broker), you will be approved automatically, since you are opening an account that is funded with your own money.
What is a day order? ^^^
Once you have given a buy or sell order, unless it is a good till cancelled order, if your broker does not fill your order that day, you have to re-enter that order the next day.
What is a good till cancelled order? ^^^
A good till canceled order instructs your broker to keep the order active until you cancel it. This kind of order is used with other types of orders in order to specify a time frame. Many brokers may have limits on how long they will hold a good till cancelled order.
What is a limit order? ^^^
Limit orders instruct your broker to buy or sell a stock at a set price. The purchase or sale will not happen unless the stock reaches (or falls to) that price.
What is a market order? ^^^
A market order instructs your broker to buy or sell a certain stock right away, at the prevailing price, whatever it is. They are usually the most inexpensive types of orders to place.
What is a stop loss order? ^^^
A stop loss order gives your broker a price trigger that helps you to avoid a big drop in the price of a stock. You would enter a stop loss order at some price below the current market price. If the stock falls to this price, the stop loss order becomes a market order and your broker will sell the stock. If the price of the stock stays the same or goes up, the stop loss order does nothing.
What is day trading? ^^^
Day traders buy and sell stocks throughout the day in the hope that their stocks will continue climbing or falling in value for the seconds to minutes they own the stock. They hope to lock in profits from the short moves a stock may make during a day. It is very risky, since it can also result in substantial losses in a very short period of time.
What is stock brokerage? ^^^
Stock brokerage is the matching up of the buyers and sellers of stocks. A transaction on a stock exchange has to be made between two members of the exchange; you cannot go to the London Stock Exchange and buy a stock. You must purchase that stock through a broker who is a member, and that activity is called stock brokerage.
What other services besides buying or selling stocks does a stock broker perform? ^^^
In addition to trading (buying and selling stocks) for their clients, stock brokers may also offer advice to their clients on which stocks, mutual funds, etc. to buy. Stockbrokers also sometimes or exclusively trade on their own behalf, speculating that a stock will increase or decline in price. In this case they are considered simply traders, since they are not brokering for anyone else, but trading on their own behalf.
Who are stock brokers? ^^^
Individuals who perform the service as intermediary between those who want to buy stocks and those who want to sell them are called stock brokers.
Will the stock broker watch my stocks for me? ^^^
This depends on the level of service you have agreed upon with your broker. Most of the time, investors give orders to buy or sell a certain stock. This is done through market orders, limit orders, stop loss orders, good till cancelled orders and day orders.