A person can participate in transactions on the stock market in the status of a broker or a trader. What are these professions?
Who is a broker?
Under a broker is understood as a participant in stock trading, performing mainly intermediary functions in the implementation of various transactions and receiving remuneration for this from the participants in the relevant contracts. The broker's task is to conduct a transaction within the framework of legitimate mechanisms and in full accordance with the wishes of the customer.
In addition, traders turn to brokers in order to obtain assistance in finding buyers and sellers of certain assets at an acceptable price. In this case, the broker who is able to find the right partner usually receives a significant percentage of the transaction.
Solving the problems characterizing the activities of brokers requires specialists of this profile to have a fairly high level of professional training and knowledge in the field of various aspects of the operation of stock markets and the conclusion of transactions on them.
Technically, the work of a broker can be carried out both through personal communication with traders and in automatic mode - for example, if he develops software that allows, on the basis of special algorithms, to find the right partners for the customer or to conduct secure transactions for the purchase and sale of assets...
The broker and customers work on the basis of an agreement, according to which the parties are responsible to a certain extent for their actions, acquire rights and obligations. As a rule, a broker has a greater scope of responsibility and obligations under the relevant contracts, since, firstly, he receives compensation for his work, and secondly, he solves problems of particular complexity, in which his partner may simply be incompetent (and therefore he has to completely trust broker).
Who is a trader?
Under a trader means any participant in stock trading - regardless of the level of his professionalism, sources of capital used, independence of decisions. As a rule, a trader uses his own financial resources to invest in stocks and carry out various trading operations - buying and selling various assets, currencies, raw materials.
Almost anyone can become a trader. The minimum investment threshold in many fund projects is literally a few dollars. But, of course, for successful trading, it is desirable, firstly, the presence of significant amounts of capital, and secondly, the necessary skills for its effective investment.
The main difference between a broker and a trader is that the first participant in stock trading performs, as a rule, intermediary functions and does not participate in the purchase and sale of assets, and the second is just the main a trading participant and applies, if necessary, to the services of a broker.
A trader earns from the difference in prices when buying and selling assets - when he manages to buy goods cheaper and sell more expensive (or play a short position - selling the derivative at a high price, then - buying it cheap).
A broker earns from commissions and fees from intermediary operations, which he carries out, regardless of whether the trader who turned to him for help managed to earn.
A trader is, as a rule, an individual, a specific financier involved in transactions. Sometimes different traders make decisions collectively, but, one way or another, they place a common bet on the purchase or sale of certain assets in the stock market.
A broker can also be a legal entity - for example, a trading platform that provides legitimate transactions for the sale and purchase of various assets, and also helps traders involved in trading find partners and conclude deals with them.
At the same time, it is not typical for a broker to provide advisory services for traders - as a rule, he does not suggest with which partners it is better to conclude transactions, which assets to choose for buying or selling. The broker only executes the orders of the customer in the person of the trader. But sometimes consulting is also included in the range of brokerage services. True, in this case, the financier usually does not bear responsibility for the result of trading operations in which traders who have received appropriate consultations participate.
Thus, the broker obtains a guaranteed income from participation in the stock market. A trader - only if he applies the correct strategy of participation in purchase and sale operations that is adequate to market trends.
Having determined what is the difference between a broker and a trader, let us fix the conclusions in the table.
|What do they have in common?
|Brokers in their professional activities most often interact with traders, and vice versa - within the framework of legal relations in the field of stock trading
|What is the difference between them?
|Provides intermediary services in trading operations on the stock market and does not participate in the sale and purchase of assets
|the main participant in trading on the stock market
|Earns on commissions and fees for intermediary services rendered
|Earns on the difference in price between assets when they are bought or sold
|May be an individual or a legal entity
|Usually this is an individual
|As a rule, it is a specialist (a group of specialists, when it comes to a broker - legal entity) highly qualified in the field of stock trading
|A person with any level of competence in the field of stock trading can become a trader