A stock trader is a person who buys and sells securities on a stock exchange. Common types of traders include individual investors, professional money managers, and floor traders. Most stock traders work from home or an office, making trades over the phone or the Internet. Floor traders typically work on the actual stock exchange floor.
An individual stock trader buys and sells stocks, options, and futures to build a personal portfolio. Since there are so many individual investors, trades are usually completed through a broker. Many personal investors use online brokers. Investors who use online brokers usually place trade orders on the Internet. Generally, these investors are doing their own research and making trading decisions without the help of a professional money manager.
Since this type of stock trader is not making the actual trades, no professional license is required. Almost anyone can open an online brokerage account. These investors typically need to make a minimum opening deposit to start an online investment account.
An investor may also choose to hire a professional money manager to control their stock portfolio and make trades. Professional money managers are also known as investment consultants, investment managers, stock brokers, and wealth management consultants. In the United States, professional money managers are licensed by the Federal Industry Regulation Authority (FINRA) to make trades and handle money for their clients. These managers also use brokers to carry out trade orders.
Brokers are also licensed by FINRA, and usually combine buy and sell orders from all of their customers. These orders are then passed on to a floor stock trader. This trader fulfills the orders on the stock exchange floor in an auction format. Floor traders can also send trade orders to the auction floor electronically to be carried out by a stock exchange employee.
Floor traders work for companies that have one or more seats on a stock exchange. These professionals must obtain a trading licenses, usually through the exchange itself. Floor trading is a highly competitive, fast-paced, and stressful job.
Stock trading is regulated by the Securities and Exchange Commissison (SEC). Any licensed stock trader who breaks SEC or FINRA rules, or is found guilty of a crime involving securities, can lose his or her trading license. This revocation can prohibit the person from trading stocks for a certain period of time, or permanently, depending on the severity of the offense. In addition to losing the trading license, the offender will most likely have to pay a heavy fine.