What does a Day Trading Broker do?

Bobby R. Goldsmith

A day trading broker initiates a high volume of financial trades in a short period of time. A day trader purchases stocks, bonds, treasury notes or commodity futures and sells them off by the end of the same trading session. The aim is to make a profit on the trades while minimizing the losses of trades that are unprofitable. A day trading broker will either work for a brokerage house or will work independently. In either case, a day trading broker, unlike a day trading investor, works in the service of his clients rather than for his own portfolio.

A day trading broker initiates a high volume of financial trades in a short period of time.
A day trading broker initiates a high volume of financial trades in a short period of time.

Brokers with expertise in a variety of markets are hired by day trading brokerage houses. Some day trading brokers specialize in forex, others in commodities. Some focus on trading on the stock exchanges of different countries. The more varied the staff that a brokerage house is able to hire, the wider the array of investors it will be able to attract.

Stock brokers may offer advise to clients over the phone, online and in person.
Stock brokers may offer advise to clients over the phone, online and in person.

Typically, a day trading broker spends as much time in consultation with clients as he does with actual trades. This is due to the volatile nature of buying and selling short positions. In many cases, a day trading broker's clients will attempt to micromanage the operations of the broker, out of fear of high losses. The broker must possess the ability to clearly communicate his or her methodology in conjunction with the day trading system in use.

While a day trading investor is only interested in his own returns, a day trading broker must remain focused on multiple portfolios, ensuring that each one is poised for the best possible level of returns. Brokers must maintain basic documentation of the rate of ruin for all positions in numerous portfolios. Rate of ruin is the calculation that a day trader computes for his overall portfolio. It is calculated through a simple ratio that compares the maximum amount of profit that is possible versus the total amount of loss possible. For day traders making two or three moves a day, rate of ruin calculations are not a problem, but for brokers with dozens of trades on behalf of numerous clients, it can be overwhelming.

Due to the various tasks for which a day trading broker is responsible, he should be capable of multi-tasking and performing analysis on his various accounts. Day trading brokers often work in hurried bursts of activity, following the movements of several competing trends simultaneously. A broker must become accustomed to a work environment that is constantly in flux.

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