Stockbroker Is Different From a Provider Of CFDs In Stocks

Like it or not, you need a stockbroker of some sort to be able to buy or sell equities. Nevertheless, the dramatic change of scene brought about by the Internet has provided traders with a number of options in regard to the type of stockbroker they choose to deal with.

It is necessary to deal with a stockbroker because you cannot deal directly with the stock exchange. The stockbroker charges a commission on each trade for this service. Being an extremely competitive market, most brokers also offer certain value added services such as supplying account holders with market news and analysis, annual reports and buying and selling tips.

The Internet has enabled online trading, which has been instrumental in changing the face of financial markets and opening up the new markets for individual traders. For example, the foreign exchange (forex) market, which was at one time reserved for banks and large financial institutions, is now open to the small individual investors. In addition, it has also enabled the introduction of new products such as CFDs. CFD or contract for difference, is a tradable instrument whose price is based on the value of underlying assets including equities.

A CFD with a company’s stock as the underlying asset means that traders can benefit from price movement in stocks without having to deal with a broker. Both forex and CFDs are over-the-counter markets. Trades are directly between two principals without the necessity of routing transactions through a central agency like a stock exchange. This has prompted many stockbroking firms to take on the role of forex dealers and CFD providers. However, being an unregulated market, it is advisable that beginners check the difference between a stockbroker and CFD provider as scams in financial markets are not unknown.