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Our broker might be the one who will make a good neighbor. He may even be invited for a Sunday snack. He might even be your best of friends. But do you think he will remain friendly if you stopped putting food on his table? In friendships, excessive loyalty can lead to clouded judgment and costly mistakes. Brokers drain cash from the pockets of traders who do not understand basic truths about the industry. Please read the next few parahs which is going to be an eye-opener for you.

Our brokers engage themselves with a well rehearsed and planned game of duping their clients. Everything under the sun is promised to their clients. They keep making money through these ignorant clients until they are famised of this game and leave themselves.

Brokers can be classifed into many types with one common characteristic; all of them eager to drain our account. The most common kinds of brokers are the yes man, the pusher, the rationalizer and the true believer.

The yes man – has his own ideas and prefers to endorse everything. Their basic strategy is to wait until he can detect some hint of opinion, and then agree strongly in the hopes of getting you to place a trade. They are usually a passive aggressive type who seeks out confident, opinionated clientele who like having their egos stroked.

The pusher – is the most aggressive wanting to take X trade right away without seconds thought and will not take no for an answer. The pusher typically gravitates towards immature individuals who fall prey very easily.

The rationalizer – is consistent loser who has an excuse for why his recommendations go bad. The rationalizer can cheerfully handle worst things with his pathetic track record.

The true believer – is an old timer and a fundamentalist at heart, beating a tired drum for the same tired market that had a big move years ago. They simply keep revolving around the same place just because somebody had said, there was treasure here few years back. They do not look for new or better opportunities.

All the above styles are not concrete. Some brokers will dominate, while others may display a combination. Of the four, the true believer and the rationalizer are probably the most dangerous, because if persuasive they can do the most damage, keeping you and your account hanging on to hope for months or even years.

The problem with the brokerage industry is not the capabilty of people who work. Honest, intelligent, hardworking people are drawn to the markets every day with big expectations of making new businesses. Though many successful and fund managers got their start as stock brokers, that is exactly the catch. It is no coincidence that the majority of “experienced” brokers cannot trade. If they could trade, they would not have stayed brokers.

Fund managers have interests in direct alignment with their clients, because of the percentage paid for trading profits. They only make money if the client makes money. Brokers take their commission cut whether the advice is good, bad, or worse than useless. It is thus no surprise that when it comes to measuring broker performance within the industry, the entire emphasis is on commission revenues generated. The broker collects whether we win or lose. Therefore, it is the job of a broker to get us trade as much as possible, regardless of our best interests, so he can get his cut before we burn out.

The moment we find a rare broker who is competent, knowledgeable, has a passion for the markets, knows how to trade, and actually has your best interests at heart, he is probably new to the business. In order to make consistent use of your broker’s skill to place your trades, you must have the emotional temperament and discipline to ride out inevitable losing trades of your system. You must have strong commitment and steadiness to take each valid trade of your system without fail and remain careful. If you want to employ a broker for your financial assistance, you need to have little knowledge to extract work from him.

Never ever depend on a broker completely. Educate yourself before you call upon a broker to assist you. Ask for references of few of his previous clients though you may not choose to talk to them. Ask them for a portfolio and cross-check as much as possible. Ask for a commitment and finally if you are comfortable, you may shake hands with him.

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