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Why You Must Not Take Tips From Your Broker


There are a lot of reasons why you should not take tips from your broker.

Recently I emailed my subscribers asking them the problems they faced while trading. At least 5 people said they were taking tips from their brokers.

When I asked them why the brokers – their reply was that since they know the stock markets better and that they have the ability to move markets.

Here is the the copy of email received:

Dear Sir,

The problems while trading faced by me are:

1) I am a beginner and my broker is not able to provide proper advice, hence losing money.

2) No knowledge of option and futures trading.

Please advise.

Thanks,
Kind Regards,
Homi

Now what happens is when a newbie opens a Demat account they are in touch with their brokers and the brokers have this habit of telling a lot of things about stock markets. This stock is hot that stock is a multimillionaire/multibagger etc. The newbie who is a novice stock trader starts dreaming making it big in a short time.

So after the account is opened the first person to look for tips is his broker.

Well, let me tell you that a broker is a broker – his job is to make sure your transaction goes through smoothly and he/she collects the margin, brokerage and taxes from you. His job is also to maintain your account, settle your account every quarter and makes sure your money is safe with him as they have to report to SEBI their balance sheet. Its not easy for them to take your money and run away.

Earlier rules were not very strict – so some brokers were risky to open account with. But today SEBI has ensured that all brokers maintain a safety measure to keep client’s account safe. In fact every quarter the brokers are obliged to return the money to their clients bank account which is not connected to a lien. A lien means any kind of obligation towards a trade. The free money has to be returned back to their client’s bank account.

So their job is to just maintain your trading account. Their job is not to study about stock markets or stocks. They give you advice so that you trade and they can make some brokerage money.

That is the reason you should not depend on anyone for stock markets tips advise. A course or study materials are ok but not tips.

Read this why I do not give tips and why you should also not take tips.

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DISCLAIMER: I am NOT an Investment Adviser (IA). I am an Authorized Person (AP) of a Stock Broker. In other words I am a sub-broker. I DO NOT give tips or advisory services by SMS, Email, or WhatsApp or any other forms of social media. I strictly adhere to laws of my country. I only offer education for free on finance, risk management & investments in stock markets through the articles in this website. You must consult an authorized Investment Adviser (IA) or do thorough research before investing in any stock or derivative using any strategy given in this website. I am not responsible for any investment decision you take after reading any article in this website. Click here to read the disclaimer in full.

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About the author: I started trading stock markets since 2007. However my first 3 years were losses. Then I dedicated almost 1 year on studying, researching, paper trading options and learned a lot in that time. Since 2011 I am trading Nifty options profitably. Call me if you need any help trading options on 9051143004.

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