Have you ever wondered what defines a stock broker and a trader and why the two are not one and the same thing? Well, you are not alone. Most people actually use these two words interchangeably, perhaps because they both are involved in the transfer of securities. The fact, however, is that these two are worlds apart. So what’s the difference between a trader and a stock broker?
Stock brokers act more or less as sales agents. What this means is that stock brokers works to connect those interested in securities with prospective buyers and sellers. The brokers earn a commission for every sale that goes through. For stock brokers to be successful, they have to work hard to form networks and create relationships as their performance is based on their ability to bring in security traders and keep them interested in the securities market.
Traders on the other hand buy and sell securities on behalf of the employers who in most cases happen to be investment firms. Traders take their time to analyze the market and the different trading options available. Most traders have a background in finance. They employ the knowledge gained through education coupled with experience gained in the securities market to make decisions that serve the purpose of their firms.
While most brokers are outgoing, traders can be introverts but are required to be exceptionally good in math and finance in general. This is not to mean that traders should lack proper negotiation and networking skills. Traders need to communicate their decisions on whether to buy or sell certain securities to the brokers and convince the brokers to make this happen.
From the above points therefore it is clear that a stock trader is higher up the food chain and brokers often work for the traders. It is however possible to find traders who double up as brokers. A stock broker on the other hand will rarely act as trader. Exceptionally good stock brokers may rise up the corporate ladder with time to become stock traders. Their good performance however needs to be backed by academic qualifications as most investment firms consider these to be a major requirement.
Traders generally earn more that the brokers and they have a more stable income compared to their counterparts. The actual amount however differs depending on the employer and the terms of employment. The stock broker’s income is pegged on the number of sales made and brokers with a lot of sales may even earn more that the traders. More information about a stock broker career can be found at this web address.