You will need a Forex broker or a stock broker very much. The "broker" is one of the most important people in the life of every investor. All securities transactions go through him. If you want to buy or sell stocks that are listed on a national exchange, you have to use his services.
In the business world, he is called a "registered representative," which has replaced the old name "customer's man." He is a registered employee of a brokerage firm, preferably one that is a member of the New York Stock Exchange. He is not a broker in the traditional sense, but he is the link between you, the customer, and the firm's commission broker, who executes orders on the exchange floor.
How He Acts
The job of the representative is to tell investors about all the services his company offers. First, he will send your orders through the Monthly Investment Plan to buy or sell stocks or bonds that are listed or not listed (over-the-counter), domestic or foreign, in round lots, odd lots, or pieces. He will also buy or sell rights or warrants, which, in the simplest terms, are options to buy a certain number of shares of a stock issue. He will help you buy or sell commodity futures, such as grains, coffee, cotton, soybeans, or anything else you want.
He will place any order you tell him to, whether it's at the market, the limit, or the stop. He will either buy with a loan or set up a short sale.
He will be available to talk to you about the value of certain stocks or groups of stocks, or to look over your whole portfolio. He will give out stock reports, newsletters, market analyses, and anything else that his company puts out. He will store your securities in the firm's vault, collect your stock dividends or bond interest, and send you regular statements on any shares held for your account.
His fee is the usual commission you pay when you buy or sell stocks. His services don't cost anything else (although you will pay interest, naturally, on money you borrow from him for a margin purchase).
He Doesn't Do
Your representative won't and shouldn't act as a stock market promoter or tipper. He won't give you advice about buying or selling unless you ask him to. He won't pick for you between two stocks that look just as good. He won't try to get you into the market quickly and then sell you out. That's not how he does business.
How a Brokerage House Works
Brokerage houses are a lot like offices anywhere else, except that they have lots of interesting market stuff. A quote board is usually on one of the walls in the customer room of a large brokerage house. The order of the items may be different, but they all give the same information.
For each stock listed—and it's a pretty big board that shows a lot more than just the leaders in each group—the quote board will show the current and previous year's high and low prices, as well as the previous day's opening, high, low, and closing prices, and the prices of the day's sales in order.
There may also be a list of prices for goods. There will probably be a ticker machine or the numbers will be shown on a screen that makes them big enough to read from across the room. There may also be a Dow-Jones ticker that sends out news, statistics, and any economic and financial information that the large D-J organisation can find.
Most of the time, chairs or benches are set up in front of the quote board so that customers can relax while they find out what the new day has in store.
All of this is for your ease. You can call your broker and get the same information, but his office is happy to have you stop by.
What you can't see is your firm's research department, accounting department, or vault, but you can if you want to. The people who work in the research department are called securities analysts. They study the performance and future prospects of different stocks and write reports about them. Analysts often go to companies in person to learn more about them.
Some are experts in oil, while others know a lot about railroads or utilities. A lot of their work involves studying one company after another, but if a customer asks, they can also do specific analyses. (However, nobody will do a special analysis of DuPont to see if you should buy 10 shares.)
The accounting department's job is, of course, to keep track of the thousands of transactions that have been done and to keep track of where each customer stands.
Many brokerage houses are also investment banking firms that are ready to help companies that want to raise more money by issuing new securities. As we'll talk about in more detail later, a company that gives out stock does not sell to the public directly. It sells the whole issue to a group of underwriters, who then sell it to the public with a small markup, or "spread."
In this case, you don't have to pay a commission because the broker's costs and profit from the sale are already covered by the premium you pay. (In 1956, 10.2 million common shares of Ford Motor Company were sold to a group of more than 700 underwriters for $63 each. This was the largest stock sale in financial history.
The public price was $64.50 per share, which was a difference of $1.50. This was a very small spread, even though it cost the syndicate a total of $15,300,000.)
Brokerage firms can "take a position" in a stock as well. This just means that partners, officers, or the brokerage firm itself could buy a stock based on their own advice. Since how well these stocks do in the future may depend on how many other people buy them, brokerage houses are very careful about telling the public what they own.
Then, as a customer, you can decide if Blank stock is a good buy because your smart broker owns some, or if his report on Blank is too optimistic because he owns some.
If you use a Forex broker, he will do the same thing for you, but he will sell you the currency pairs that you want.
