What is the Difference between a Stock Broker and a Stock Trader?

There’s a world of difference between the roles and duties of a stockbroker and that of a stock trader. The difference lies with the expertise and formal qualifications. It’s the job of a stockbroker to place the trades on behalf of clients.

Brokers are regulated by the FSA, and that requires people to satisfy the criteria to ensure that brokers are highly skilled in their profession, and able to uphold the high standards needed to protect their client’s investments.

What is the Difference between a Stock Broker and a Stock Trader?

A broker will normally be educated to a high degree. A trader on the other hand, isn’t responsible for dealing with clients. Anyone can begin to trade on the stock market, with nothing more than a brokering account and perhaps even some software to help with monitoring the market trends and movements. In essence…

  • A broker executes trades on behalf of clients and the trader finds the best trades to make.

A trader, without the right qualifications cannot act on behalf of clients. Without the training, a trader would work for themselves, placing trades and earning a living based on the profits they make from trading.

Jobs are available for trainee stock traders, requiring no formal education, and full on the job training provided. Whilst candidates don’t need to have experience in the field, trading independently and building up a portfolio of winning trades, can set you apart from other candidates, as you’ll be able to showcase your abilities to make exemplary judgement calls, by highlighting your capabilities of chart analysis.

The typical independent trader will be a day trader and that will take a number of hours. It’s a profession where traders are constantly in front of a computer screen, keeping an eye on the trends, comparing stocks, monitoring gaps, and trading when the price is right. At the end of the day, the trades are closed off, and the profits and losses are counted. There is no set salary for an independent trader as every day is different.

Markets take shifts and sometimes a loss is made, but in the up months, tremendous profits can be made. Those profits will need to be budgeted to cover for the down months, to ensure there’s sufficient money to live off, and keep some funds for placing trades. Excellent mathematical skills will be needed to be a trader, but the formal qualifications won’t be required. You can take courses and become a trader though, should you feel that trading is going to be more suited to you, than brokering.

Stockbroker Vs Stock Trader

Both job roles can be found in large financial firms, dealing with investments. One of the major differences is down to the sales.

  • It’s the brokers job to make a sale, and it’s the job of a trader to make the profit.  

That’s a major difference between a broker and a trader.

The pace of the work varies in the jobs too. A stockbroker will spend a lot of their time dealing with clientele, to ensure they understand the clients’ objectives, so they can meet the goals required. The trader is going to be glued to the computer screen, constantly monitoring the market movements, and making decisions on which trades to place, when to buy and when to sell. They need to act fast and make judgement calls every moment of their working day.

For those who prefer the trading side of the stock market, the trader positions will be more suited as brokers with a large client roster, will need the services of a trader to make the trades while they communicate with their clients. Overall, if you love dealing with people, then become a stockbroker and advise people on the best investment choices to build their portfolio. If you don’t consider yourself to a strong communicator, then working as a stock trader may be more appealing, as you’ll only have to execute the trades in line with a brokers instructions.