Broker vs. Trader

In the realms of economics, money, trade and business, people often become confused between the jobs of two much related professions. These are the stock broker and the stock trader. Yes, their roles are often confused with each other, but in reality, there is a distinction between the two. So, if ever you are leaning towards these two professions, then make sure you clearly know how they differ.

First, the primary entity involved in the discussion is securities. So what are these securities? These are actually instruments or contracts that show ownership, as in the case of stocks. Securities can also include an agreement due to debt, as in bonds, or one’s right to own something as in derivatives. Almost all things that are part of financial assets can become a form of security. Because these items have a sense of ownership, they have a corresponding value as well. Thus, securities can be traded.

This is where brokers come in. Brokers are more or less the same as sales representatives. They can buy and sell stocks, and have direct contact or communication with their respective clients. They negotiate the best deals possible for the latter. They do this either for themselves or for a particular firm. As well, they are in charge of keeping a roster of clients. In the long run, they seek to enlarge their client base through a more creative means of advertising, or by conducting seminars to lure possible clients. They do this by keeping their clients informed of stock price fluctuations.

Traders usually work under a much bigger investment management company or firm. They also buy, sell, and trade securities in place of the assets being handled by the said company. Although most traders don’t usually take hold of their stocks for a very long time because of price variations, they simply buy and sell stocks depending on the preference of the manager of the investment management company. If the latter says a go signal because stocks have reached a certain price level then the trader will immediately buy that particular stock.

Overall, no matter what road you decide, a stock broker or stock trader, it is a must that you first develop your communication skills, as well as your negotiation prowess, for this type of work places you in a highly pressured environment that moves fast and needs quick decision making. Although both roles can buy or sell securities, the two differ because:

1. The broker is much closer to the actual clients and acts as a sales agent, whereas the trader is much closer to the portfolio manager.

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