There is often a bit of confusion surrounding exactly what a stock trader does as they are often confused with investors in the stock market. The difference is actually easy to understand if you look at it like this. A professional stock trader is the person who acts on behalf of an investor looking to buy into the stock market. A stock trader is registered to act in that capacity whereas an investor buys and sells through a licensed trader.
A Quick Analogy
Perhaps the easiest way to explain what a stock trader is and does would be to make an analogy to real estate. A stock trader works much like a real estate agent who represents the buyer or seller of a property. They would do all the bidding on the floor much like a real estate buyer’s agent submits offers on a home for sale. The investor then would be the buyer and the ‘trader’ would be the person doing the paperwork for a commission. Traders are paid in the same way. Someone investing in the stock market may only need to follow the NASDQ and NYSE. Understanding the market’s hours and holidays is also important because they need to move on a trade when the prices hit a specific price.How to Qualify to Be a Professional Stock Trader
While it isn’t necessary to attain a college degree to become a professional trader, a business or finance degree comes in handy. It is imperative to understand all the factors driving a market and a degree in economics, business or finance would provide a strong foundation in how to read market indicators.So then, although you wouldn’t need a college degree to work as a professional stock trader, there are exams you would need to pass in order to be licensed to function in that capacity. Whether you are interested in being a broker or a trader, you will need to have what is referred to as a FINRA (Financial Industry Regulatory Authority) license. This enables you to execute orders in the market.
In order to obtain the FINRA license there are a few tests you may need to take with a minimum passing score. For example, if you are looking to be a professional trader the exam you need to pass would be the Securities Trader Representation Exam and the minimum passing grade is 70. It is often referred to as the Series 57 exam. There are 50 questions in all, and you are allowed 105 minutes to take the test.
Serving an Apprenticeship
Perhaps a bachelor’s degree in finance would help, but there are other ways to learn what you need to pass the exams and qualify to work as a professional trader. Some professional stock traders served an apprenticeship under a licensed trader. Instead of going to school they had a hands-on approach to learning the market and some say they actually were happy to have learned this way. Many began in an entry level position with an investment firm and worked their way up. They feel this hands-on approach worked well for them.On the other hand, there are professional stock traders who say that the education they received in a business degree helped them prepare better for some elements of the exams they were required to take. In any case, there is a difference between a professional stock trader and an investor who trades on the market. The investor is looking for a long-term investment gain whereas a professional stock trader earns commissions for their work representing investors on the market floor.
