A stock trader is someone who makes money buying and selling stocks on a stock exchange. Individual investors, professional money managers, and floor traders are all common types of traders. The majority of stock traders work from their homes or offices, placing trades over the phone or via the Internet. The majority of floor traders work on the actual stock exchange floor.
To build a personal portfolio, an individual stock trader buys and sells stocks, options, and futures. Trades are usually completed through a broker because there are so many individual investors. Online brokers are used a large number of individual investors. Investors who use online brokers typically use the Internet to place trade orders. In most cases, these investors conduct their own research and trade without the assistance of a professional money manager.
No professional license is required because this type of stock trader does not make the actual trades. An online brokerage account can be opened almost anyone. To open an online investment account, these investors typically need to make a minimum opening deposit.
An investor can also hire a professional money manager to manage their stock portfolio and execute trades on their behalf. Investment consultants, investment managers, stock brokers, and wealth management consultants are all terms used to describe professional money managers. Professional money managers in the United States are required to be licensed the Federal Industry Regulation Authority (FINRA) in order to make trades and handle money for their clients. Brokers are also used these managers to execute trade orders.
Brokers are also FINRA-licensed and typically combine all of their customers’ buy and sell orders. These orders are then passed on to a stock trader on the floor. This trader fills orders in an auction format on the stock exchange floor. Trade orders can also be sent electronically to the auction floor, where they will be executed a stock exchange employee.
Companies with one or more seats on a stock exchange employ floor traders. These individuals must obtain trading licenses, which are usually obtained through the exchange. Trading on the floor is a highly competitive, fast-paced, and stressful profession.
The Securities and Exchange Commission regulates stock trading (SEC). Any licensed stock trader who violates SEC or FINRA rules or is convicted of a securities-related crime risks losing his or her trading license. Depending on the severity of the offense, this revocation can prevent the person from trading stocks for a specific period of time or permanently. The offender will almost certainly have to pay a hefty fine in addition to losing his or her trading license.