With online stock trading the latest in Internet technology, why do I need a broker to trade stocks online? A stock market is made up of at least one stock exchange, and usually more than one. A person who is not a member of a stock exchange can not just trade stocks on the exchange or the market. A stockbroker is a member of the exchange that they trade on, and this is how you have access to buying and selling stocks on the stock market. Only by using a stockbroker is it possible for normal individuals to trade on the stock exchange and the stock market.
All stockbrokers for a specific exchange must be licensed and registered by that exchange, and this insures that the stockbroker acts ethically and legally at all times. If a stockbroker is caught violating ethics or the law their trading priveleges on the exchange can be taken away. A stockbroker buys and sells stock for their own benefit, and they also trade stock shares for individuals that are not stockbrokers. This practice earns them a commission on trades that they execute for you.
Brokers that specialize in online stock trading use computer terminals to communicate and execute these trades for their clients. Just because trades are executed electronically online does not mean you do not require a broker. Even trades that are executed electronically are only accepted if they are executed by a registered stockbroker on that exchange. Without a broker, you will not get any farther electronically trading stocks than you would if you waded onto the trading floor on Wall Street and tried to trade. Not matter which method you use to trade your stocks, whether you use an electronic execution or an execution on the trading floor of the exchange. A stockbroker is a member of the stock exchange, and only members can trade on the exchange. These brokers trade stocks for themselves, and they trade stocks for a commission for individuals who are not a member of the stock exchange. In this way normal people can invest in the stock market and buy and sell stocks. Online brokers generally work from computer terminals that are linked to other computers creating a network. A broker is needed to trade stocks no matter which trading method you choose, and finding the right online broker is the most important decision you will make concerning stock trading.
