Discretion is a powerful tool that allows brokers to act on behalf of their clients without requiring the client's explicit permission for each decision. It is important to consider how discretionary orders can influence the client’s portfolio decisions and risk exposure. When a broker has discretion over a trade, it is commonly referred to as a 'discretionary order'. It is a situation where the broker has authority to make decisions about the order and the specifics relating to it.

When a broker has discretion to work an order for a client, it can involve several types of decisions. These can include setting the limit price and quantity appropriate for the order, choosing the appropriate exchange to execute the order, selecting strategies to implement the trade, and selecting the timing of the order. Discretion on behalf of the client also allows brokers to decide when to take profits and execute stop losses in response to quickly changing market conditions. Discretionary traders have the power to make decisions regarding opening, closing, and adjusting positions, as well as performing hedging activities - all with the aim of getting the best possible outcomes for the client.

Discretionary orders offer benefits to both the broker and the client. For the client, they decrease their participation in the order process and free up the time required when managing their own order. This can be particularly beneficial for those clients who are time-constrained or lack the knowledge required to effectively manage their orders themselves.

When an order is placed using discretion, it relieves the broker from any possible losses that the client may suffer, so long as the broker is utilizing their discretion in the best interests of their client. Brokers can often garner more fees from trading using discretionary orders - which is an added bonus for them.

Having a broker use their discretion in order to manage an account, however, is a big responsibility and it should not be taken lightly. For example, if the broker were to engage in trades that were detrimental to their client's position, or if they failed to act in the best interests of their client, they may be held liable. It is therefore important that the client carefully reviews and establishes guidelines prior to granting discretion, to ensure that proper business practices are being followed by their broker.

Overall, discretionary orders can be a powerful tool employed by brokers on behalf of their clients, as long as it is responsibly managed. Brokers should be aware of their fiduciary responsibility to the client and use their discretion to always work in their best interests. For clients, it is important to understand how discretion is used and to make clear trading guidelines for their broker - this will help to ensure that the discretionary trading process works in their favour.