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A stock trader is someone who works for themselves or for a firm, buying and selling stocks. They may also buy and sell bonds and other financial instruments. Stock traders typically focus on making profits by taking advantage of price fluctuations on individual stocks in the market. They may buy or sell shares for short-term trades lasting just seconds or longer term trades with a holding period of several weeks.
A stock trader is a professional, and some stock traders are known as financial advisors if they have clients of their own that they trade for. These types of stock traders also act as an adviser or money manager to their clients. Professional stock traders may work independently, as an employee in the office of a large bank corporation, or on the floor of a trading exchange.
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A stock trader watches the market and manages monetary investments in different stocks. They may work as managers dealing with mutual funds, hedge funds, pension funds or investment funds. These professionals may engage in different types of stock trading; from day trading, momentum trading or market making, to trend following, arbitrage, and trading the news.
Other types of stock traders may buy and hold stocks for an extended amount of time, from several months to several years. Stock traders typically work closely with a stockbroker or brokerage firm to get access to the shares that they trade.
One of the responsibilities of the stock trader is researching the stocks they are interested in trading. There are different types and philosophies behind company stock research, known as technical, fundamental and environmental research. Trading professionals may choose to use one or a blend of these types of research methods.
The goal of researching stocks is to cut the element of risk and make higher profits from their investments through trading disciplines and insight into the companies as well as external market factors.
To become a stock trader, there are no strict requirements, however a degree in finance or accounting is helpful. Most companies that hire stock traders put them through an in-depth training program to teach them the specifics. College students thinking about becoming a trader can try to get internships at brokerage firms to learn more about the job. Some traders get their start by helping other traders on a trading floor, and by initiating trading accounts.
Traders will need to take exams and complete certain license requirements. The licensing requirements are enforced by the National Association of Securities Dealers (NASD) and the Securities and Exchange Commission (SEC). Different licenses are required depending on job specifics:
The Financial Industry Regulatory Authority's (FINRA) website has more information on licensing.
Becoming a stock trader requires an interest in finance, a technical mindset, the ability to use computers and understand sophisticated trading software, and a willingness to do research.
The ability to stay calm and think clearly under pressure is important as well, because stock traders who trade a client's money or funds that belong to their corporate employer will have days when they may lose large sums of money.
Additionally, a stock trader must be able to get past emotional barriers to make good trading decisions, since quick reactions are necessary as well as a good understanding of market situations. Stock traders who do well are typically not afraid of taking risks and have a burning desire to make money.
Some people prefer to start their own trading business and work at home. Entrepreneurship is appealing, but getting training and experience as a trader employed by someone else would be helpful before going it alone.
A stock trader can work in a variety of situations from a home office or bank cubicle to a trading floor. The atmosphere is typically fast paced, exciting and pressure-filled.
Unlike working in other related banking careers such as corporate finance or mergers and acquisitions, stock traders work as individuals. It helps to be an early bird, because the markets open at 6:00 am eastern time, so traders on the west coast start work at 3:00 a.m. The opening bell rings at 9:30am EST.
There is no time to run errands, take long coffee breaks, or have flex-time. Traders also work independently, with very little supervision, if they do well. Traders who don't do well are out of a job quickly.
Trading is often viewed as a high barrier-to-entry field, but this is simply not the case in today's market.
Let’s jump into this day-in-the-life account and see exactly what you do as a full-time options trader at a bulge bracket bank...
What is it like to work as a floor trader at the New York Stock Exchange? We caught up with Kenny Polcari, director of NYSE Floor Operations at O'Neil Securities, and a CNBC contributor, who walked us through a regular workday.
Just as there are many types of investors, traders range from the small, independent trader working from a home office to the institutional player who moves tens or hundreds of millions of dollars worth of shares and contracts each trading session.
Many times in my career I have encountered new traders who believe they have the ability to master the markets after reading a book on trading, or even because they have obtained some form of degree.
Are you having trouble deciding between a career as a stockbroker or a trader? Each career involves trading securities, but the nature of each varies greatly, and these variations could make all the difference in determining which career will suit you best.
It is actually very simple: Be exceptionally disciplined while implementing a sound, proven strategy. A successful trader cannot have one of these components and not the other.
A pure day trader buys and sells stocks or other investments and ends the trading day in cash with no open positions.
Professional traders are created by learning about trading, and then by experience using the information that they have learned.