What is the difference between a Stock Broker and a Trader, and?What would a person have to do become one. In other words what are the steps to becoming either a stock broker or trader. (background experience, education, skills, etc)

4 years ago

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The Old GuyBest Answer - Chosen by Asker

A world of difference. A trader could always be a stock broker, but very few stock brokers can be traders. One can call a stock broker a trader and they would be honored, but, if you're in your right mind you would never call a trader a stock broker, (it would be an insult).

Many have college educations, but it is not a requirement, unless you want to work for a bank and/or mutual fund company who do require degrees even though there are no academic courses that can prepare one for trading.

You should have some basic understanding of finance, accounting, and economics. It would help if you know the various markets, what products are traded in those markets and how trading is done. This will require some of your own education and willingness to study hard on the path to becoming a trader.

There is no such thing as a trader trainee or training programs. Those that end up in trading had taken jobs in the trading departments and have worked themselves into trading. You don't worry about salaries, or what jobs they have you doing, you just do it since it's a way of learning or getting the shot at being a trader.

Traders work as long as the markets are open, they don't stop and unless it's to get a drink, (and traders are known for that) they just keep going so you never complain about the hours or the working conditions.

In the US - You need to be an employee of a Broker/Dealer so they can sponsor you in order to become a licensed stock broker. Firms usually want college graduates, but it is not really necessary nor really a requirement but many firms like it and make it their requirement. Bank broker/dealers usually want all the sales reps to be college graduates.Your college major is not important, (No courses in the Academic world prepares you to be a broker). But since your coming into the world of Finance, some of the more helpful majors would be Finance, Accounting, Economics or Statistics,You should be good at math and have a decent idea about the stock market.You should be good at selling, and it would help if you have an outgoing personality. So if you‘re good at sales, or have a good sales background in place of a college degree, you’re part way there.Try to get with any major brokerage firm they will put you through an in-house training program, which is primarily getting you ready to take the necessary test for licenses. You will need a Series 7 which is a General Securities Brokers test, and a Series 6 which is just for state approvals.Most brokerage firms, except bank B/Ds, will put you on salary and once you have passed the test, they will slowly take you off salary and put you on commission basis pay out. Banks will usually keep you on salary.If you have your choice, you’re always better going to work for a regular B/D rather than a bank - You will learn, faster, better and the proper way of how the industry works. As a broker for a B/D you can always find another B/D that will hire you or at the worse, you can always work for a bank. But if you’re Bank B/D trained and licensed, it’s very difficult to go work for a regular B/D

Regardless of which direction you go, you won't regret it, just study hard and you'll do well. Source(s):from "the street"

4 years agoIn finance, a trader is someone who buys and sells financial instruments such as stocks, bonds and derivatives. Traders are professionals, casual investors or speculators in financial instruments traded in the stock markets, derivatives markets and commodity markets, comprising the stock exchanges, derivatives exchanges and the commodities exchanges.

Several categories and designations for diverse kinds of traders are found in finance, these may include:

* stock trader* day trader* floor trader

In commerce, a broker is a party that mediates between a buyer and a seller. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Distinguish agent: one who acts on behalf of a principal.

A brokerage is a firm that acts as a broker.

Types of financial brokers

* Business broker* Commodity broker* Forex Broker* Insurance broker* Mortgage broker* Real estate broker* Rig broker* Ship broker* Stock broker* Yacht charter brokers

The traders are like lone wolves who go in and make tons of money by making quick decisions…But supporting every successful trader is his/her broker – the one who actually connects buyers and sellers and makes trades go through.

Definitions and Types of TradersYou might remember from the guide to fixed income trading that we defined 2 types of trading: agency trading, where you simply execute orders for the client, and prop trading, where you invest the firm’s own money and make your own trading decisions.But the outside world has no idea what those terms mean, so they usually refer to prop traders as “traders” and agency traders as “brokers,” which is what we’re sticking to here.Prop traders exist at dedicated prop trading firms and hedge funds, and they used to exist at investment banks before the US government banned them(the verdict is still out on other countries).Brokers exist at both banks and at independent firms called brokerages; the difference is that these smaller agency-brokers are pure middlemen and only fulfill orders while large banks have a lot more going on.

There’s more to it than that and as with other areas of trading, the dividing lines can get blurry, but that’s the basic difference and how we’ll be using the terms here. Gordon Gekko – Trader Bud Fox – Broker

What Do Traders Do?Traders are at the top of the food chain – entire teams in the back and middle office support all their trades and fix annoying IT issues for them.They analyze equities, derivatives, fixed income, forex, commodities, and anything else they might be trading and decide on what to trade, what strategies to pursue, and how to invest the firm’s money.If the trading floor were a jungle, traders would be gorillas who pound their chest constantly while stealing bananas from everyone else.Everyone wants to be a trader, but it’s tough unless you have the right education, background, and personal connections.Unless, of course, you’re Jerome Kerviel, but we all know how that one turned out.

Brokers – Support Staff?After a trader decides what to buy or sell, he would call the broker and say, “I want to buy/sell XX of XX – can you make it happen?”Technically, brokers “support” the traders but they’re completely different from the back and middle office crew.Unlike the back and middle office, brokers generate revenue – they connect buyers and sellers and make a commission on each successful transaction.The more shares that a trader trades through the broker, the more money the broker makes – and the more traders the broker services, the more money he makes.

Personalities – TradersTraders are judged almost 100% on performance – it’s one of the few professions on Wall Street where you can excel even if you show up without shaving for a week or two.If you bring in massive profits for the firm, you’ll be rewarded.Traders spend most of the day in front of their 8 or so computer screens – they might discuss ideas and market news with other traders, but overall there’s less teamwork than in management consulting or investment banking.So the trading profession attracts more introverted individuals who are good at math and great at working independently: think math and engineering majors, with a few random frat boys thrown in for good measure.

Brokers: Got Extrovert?For brokers, it’s all about relationships and networking: you’re judged based on your ability to bring in traders and keep them on board.

Profit still matters, but the quality and quantity of clients you bring in also plays a big role.If you’re a good schmoozer and you’re always the first to hear about rumors and gossip, you’d be a great broker.If Malcolm Gladwell were writing a new column about traders and brokers,brokers would be   part-maven, part-connector  – they know everyone, and they track of tidbits of information to entertain and inform traders.If a client really liked Turkish food, a broker would know all the best Turkish restaurants within a 5 km radius.There’s a lot of back-and-forth with traders on the phone during the day, so brokers often invite traders out for food, drinks, and sports (and sometimes “other forms of entertainment”) after work.It’s nothing like the back office-trader relationship where they barely acknowledge one another unless given a reason to work together on a project.

Breaking In: Trading vs. BrokeringLarge banks do take sales & trading summer interns and make S&T full-time hires, but the numbers are lower than what you see in investment banking.Major trading desks such as credit, equity, and forex might only hire 1 or 2 per desk – whereas in banking, groups like ECM or M&A might take on 5-10+ new analysts depending on the team size.With the 2010 financial reform, those numbers will shrink even further as banks disband their prop trading groups and everyone migrates to hedge funds.For networking, resumes, and interviews for trading, check out this podcast Jerry recorded – recruiting is similar to investment banking but there are significant differences, especially in interviews.With brokers, there’s even more of a focus on experienced hires: on-campus recruiting is rare, especially for smaller agency-brokers, and you pretty much have to network your way in from related fields.Some brokers also post ads online and if you have the right experience, applying online might actually work – that’s because they’re looking for very specific experience and as you move up, you get more and more specialized.Resumes and interviews are similar to trading at the entry-level, though there may be more of a focus on relationships and sales skills – similar to sales itself – at dedicated firms.Potential AdvancementAdvancement depends on how business is going: if your desk is profitable, wants to expand, and everyone likes you, then they might give you your own portfolio or trading book once you’ve proven yourself.Note that even as you “advance” within trading, your actual work may not change that much – you’re still trading all day.It’s not like investment banking where MDs are wining and dining clients and analysts are pumping out pitch books – you just get more responsibility and a higher percentage of the profits.

On the brokerage side, advancement and upside depend on how many new clients you can bring in and the commissions you generate – just like with trading, the work itself doesn’t change dramatically as you move up but you work with higher-volume clients and earn more.Work HoursWork hours are roughly the same for traders and brokers – they get in an hour or two before the market opens and leave an hour or two after market close.Brokers might try to get in earlier than traders and leave after the traders leave just to make themselves available at all times.Both are completely different from investment banking: no all-nighters and no 100-hour workweeks.Think 60-70 hours per week rather than 90-100.Who Makes More Money?And now to the $50 million (or should that be billion?) question.Most people would say, “Traders make more money!”After all, some traders make tens of millions per year, and then there are special cases like John Paulson – he made over $2 billion in cash each year in 2008-2009 by betting against subprime mortgages and CDOs.No one noticed or cared what his broker made.The problem is that everyone focuses on these once-in-a-lifetime success stories rather than the average trader: for every profitable trader, there’s a trader somewhere else that lost money.Meanwhile, the broker in between made decent money even if one of the traders did not.Multiply this by dozens of trading clients and you can see how broker commissions can add up to a comfortable lifestyle, all with far less market risk.Specific Numbers, PleaseNumbers are tough to verify, but most brokers start in the mid 5-figures range and the most successful brokers might be in the mid 6-figures range – it’s not like trading where the stars could make in the tens or hundreds of millions or billions of USD each year.If you want to believe Salary.com, they have a nice graph here.Keep in mind that the average (prop) trader makes nowhere close to that each year – some small prop trading firms don’t even pay you a salary and instead base everything on your trading performance, so you could end up with a “paycheck” of $0.The maximum pay for traders is a completely different order of magnitude, but the standard deviation is also much higher – so the median pay may not be much different between traders and brokers at the entry-level.And don’t underestimate how much you can make as a broker: brokerage firms often make more than trading firms that are suffering from a lackluster year.Are the Machines Taking Over?You’ve probably read about how trading is becoming more and more automated – should you even bother getting into the industry if computers will take over anyway?

Keep in mind that there will always be a human element – someone needs to program algorithms in the first place and continually test the programs.So it’s not as if the industry is dying – it’s just shifting in more of a quantitative direction.There’s no denying that trading itself has become more of a science club over time – so unlike with investment banking, advanced math and programming skills would be helpful here.Even on the brokerage side, more and more agency trading activity is becoming computerized as well – there will always be a need for the outgoing broker who knows everyone, but the math nerd might not be far behind him.This article was guest-written by Zeke Lee, a Stanford graduate, former management consultant with Booz & Company and former derivatives trader on Wall Street (Oh yeah, he’s one of my friends from school as well).He founded the GMAT Pill, an efficient GMAT Prep course specifically designed to help busy professionals prepare for the GMAT exam in as little time as possible. In the course, he shows you his efficient study method to scoring in the 98th percentile on the GMAT in just 2 weeks.

http://www.mergersandinquisitions.com/traders-vs-brokers/

Sales & Trading vs. Investment Banking, Part 1 – Recruiting

“So, how much food do traders eat?”“Can you really make $10 million instantly if you’re a star trader?”“Can I write about my gambling addiction and how much money I made with poker on my trading resume?”You’re about to learn the answers to all of those and more, in this 2-part podcast series on Sales & Trading vs. Investment Banking.Since I know close to nothing about trading personally, this one is an “interview” with Jerry, who does know a lot about trading – having done a trading internship, worked full-time at a bulge bracket bank and then started his own prop trading firm.What You’ll Learn In This 40-Minute Interview What you need to succeed in sales vs. trading vs. investment

banking, and why none of them require “rocket science”-level math What to do if you don’t have a pedigree, and why trading might be a

good option for you Networking tactics for both fields and the best time to cold-call a

trader

The 3 most important points to highlight on your sales & trading resume, and how to write about your poker hobby (addiction?)

Interviews, telling your “story,” and how pitching a stock differs in sales vs. trading interviews

Listen to the interview right here: Download the MP3  [40 Minutes | 19 MB] Download the Text Transcript  [20 Pages | PDF]Introduction 1:15: Intro to Jerry and his background 1:45: Skills required for trading, psychology, and why you still don’t

need to be a rocket scientist to succeed 4:30: Who succeeds in banking vs. trading and the math requiredRecruiting 5:30: Recruiting at a bank vs. prop trading firm 7:40: Recruiting for sales 8:09: What to do with no real finance experience – and why exams

and certifications aren’t the answer 10:30: How to break in from unusual backgrounds and if you’re

already out of school 12:10: From programmer to prop trader?Asia vs. the US and Language Requirements 12:55: Recruiting in Asia vs. the US and elsewhere 14:00: Language requirements in banking vs. sales vs. trading and

what to do if you don’t know the local languageNetworking and the Best Time to Call a Trader 16:50: How to network like a ninja in both fields 18:00: The best time to cold-call a trader (hint: not when he’s

trading, eating, or abusing interns) 19:23: How to approach traders differently from bankers, and why

“business talk” might be a better strategyWhy the CFA Is Still Useless 21:05: Are there any useful exams for breaking in? Nope, sorry,

please try again…Sales & Trading Resumes 23:05: Sales & Trading resumes and which skills are not as

important to highlight 24:53: The 3 most important skills to focus on in your trading

resume, and what to do if you don’t have them 26:16: Should you write about your gambling addiction? What about

knitting yarn or extreme sports?All About Interviews 27:45: How banking interviews differ from trading interviews 30:22: How much corporate finance / valuation knowledge do you

need for S&T interviews? 30:48: How “fit” questions are different 32:05: Why and how you need to tell your “story” differently and

how to talk about your future plans in trading interviews 34:34: Can you prepare for S&T interviews? 35:50: How to pitch a stock and technical vs. fundamental analysis 37:15: How sales interviews differ from trading interviews, and how

you should pitch a stock differently

Sales & Trading vs. Investment Banking, Part 2: Lifestyle, Co-Workers, Pay & Exit Opportunities

We wrap up our series on Sales & Trading vs. Investment Banking with this podcast, focusing on the lifestyle, your co-workers, pay, and exit opportunities.Whereas Part 1 was all about recruiting, this one’s all about what happens when you actually get the job – and we go into subjects like pay and bonuses in both fields and what “models and bottles” means for traders.Once again, Jerry’s the expert here so he’s the “interviewee.”What You’ll Learn In This 50-Minute Interview How you “learn” trading and why it’s completely different from

learning financial modeling A day in the life for both a trader and a salesperson, how much

money you trade, and how you can take a bathroom break if you need to monitor the market all day

Whether or not trading floors resemble Liar’s Poker, how you interact with your co-workers, and what “going out” means

How you get paid in sales vs. trading at banks vs. prop trading firms vs.hedge funds

Exit opportunities and why we both left the finance industryListen to the interview right here: Download the MP3  [49 Minutes | 23 MB] Download the Text Transcript  [24 Pages | PDF]Training Programs & Group Assignments 1:30: How the training process differs for trading, and why you might

be working with Monopoly Money at first 3:50: Junior traders vs. “real” traders and how you move up 5:45: Picking a desk: fate vs. free will?A Day in the Life of a Trader 8:20: A day in the life of a trader – what time do you wake up, what

time do you leave, and can you take any bathroom breaks? 12:40: What happens when you need to take a trip to the dentist

during market hours? 13:25: How much money do you actually trade as a trader – banks

vs. prop trading firms 15:10: Average hours per day 17:00: Relations with the sales force – pleasant or do they want to

assassinate you? 19:15: What salespeople do all day (hint: you better like the phone)Co-Worker Interactions

22:00: How much you actually talk to your fellow traders during the day, and why the hierarchy is flatter than the investment banking hierarchy

24:50: How much does a trading floor resemble Boiler Room or Liar’s Poker?

26:00: Models and bottles for traders. Sorry, you know we had to say it at least once…

29:15: Interests outside of work? What, really?! 30:30: Is sales & trading overly male-dominated? What to do if

you’re female?Exit Opportunities & Pay 34:00: Sales & trading exit opportunities 36:30: The bottom-line: Pay in investment banking vs. trading 40:00: How to earn a $100 million bonus (only works at Citi) and how

much you’ll receive as a % of your P&L 41:30: Payouts at prop trading firms and hedge funds 42:20: Pay structure for sales people and how much you can make in

sales 44:00: Bonuses in sales: the sky’s the limit, but it’s a different sky 45:30: Why we both left our respective industries – investment

banking and trading

http://www.mergersandinquisitions.com/sales-trading-vs-investment-banking-part-1-recruiting/http://www.mergersandinquisitions.com/sales-trading-vs-investment-banking-part-2-lifestyle/

A Day in the Life of an Investment Banking Analyst

“6:30 Sycophant drops by on his way out. Client meeting next Friday but wants complete turn of a pitch for first thing tomorrow morning (tomorrow morning = when he finally gets around to looking at it at some point next week). A quick calculation; there’s no way I’m getting out of here before four in the morning.”-The Bitter Investment Banker EmailAh, the life of an investment banking analyst.What will your hours be? How much work do you actually do? Do you really just play Solitaire most of the day and then only work at night?Some days you’ll be so busy that you have to discreetly use a bottle under your desk if you need to go to the bathroom.Other days you’ll have so little to do that you can take 3-hour lunch breaks and download different themes for Windows Solitaire.

Doing investment banking is like doing drugs: on your good trips you dance in clouds of marshmallows, surrounded by beautiful women (or men) serving you fruit in canopies.On your bad trips you scratch your eyes out and jump off buildings.This 24-hour period was a bad trip. And unlike The Bitter Investment Banker Email, it actually happened.7:30 AM – I am woken up by an Associate at work asking where I am. He told me to come in at 8:00 AM to send out a status report. It’s 7:30 and I’m not there yet, so a cloud of panic has descended. I roll out of bed, shower for a minute and head into work.8:00 AM – 9:00 AM – The Associate hands me a marked-up version of the status report in question. Most of his changes consist of adding/deleting commas, capitalizing nouns or changing font sizes. I send it to our team at 8:55, in advance of our call at 9:00.9:00 AM – 10:00 AM – Our investment banking team tells management aboutthe buyers who are interested in them and the meetings we’ve set up.I am vaguely listening but also working on a pitch book for an IPO in the background – multi-tasking is easy when all you do is copy and paste Excel into PowerPoint.12:30 PM – We send out a draft of the IPO pitch book to 3 Managing Directors who will be at the meeting the next day. This is the “final” version, which means that everything will be scrapped and re-done in the next 24 hours.12:45 PM – One of the Managing Directors is traveling and has requested a Briefing Book on the company we’re pitching because he doesn’t know anything about it. It’s not feasible to FedEx the book because he is 3,000 miles away and needs it ASAP – we need to PDF this bad boy.1:00 PM – The Associate drops off revisions to a presentation we’re working on for another client. I tell him I don’t have bandwidth because I’m working on a big IPO pitch for the next day as well.He tells me to finish by 5 so he can give me more changes and I can “turn” another revision by the morning. It’s probably going to be an all-nighter.1:30 PM – One of the Managing Directors who received the Briefing Book calls another Associate (Associate #2) on my team and yells at him for sending 100 pages of material – it’s taking 30 minutes to print out everything.The Associate takes the brunt of the damage. I’ve cleverly avoided the fallout by having Associate #2 be the point person for this project.3:00 PM – Starbucks. The lifeblood of investment banking analysts. I go with a friend who’s in the midst of private equity interviews and we discuss how those are going.3:30 PM – After speaking with our equity research analyst, the Managing Director decides we need to add more analysis to our pitch and focus on completely different metrics. I need to re-do most of my work.5:00 PM – I finish up with the other client presentation that Associate #1 wanted me to finish. Now it’s a waiting game on that one as I continue revising the IPO pitch.7:30 PM – I’m eating dinner at my desk. No time to go join everyone else today but it’s Japanese food so I’m satisfied. Meanwhile someone from Equity Capital Markets, the team responsible for IPOs, comes over and tells me to scrap all the analysis the MD wanted.

10:00 PM – I get last-minute changes from everyone else on the team. Shouldn’t take too long to process, but production can only start printing at midnight, which means I’m going to be here until 1 AM minimum.10:15 PM – As I’m going through changes, Associate #1 stops by and has a bunch of changes to the client presentation I finished at 5 PM. I tell him I can only get started after 1 AM so I probably won’t have anything until the next morning. “Dance, monkey.”12:30 AM – I finish up and production starts printing the presentations. Associate #2 comes over to “supervise” the production and review the finished product.1:00 AM – I notice an inconsistency on 1 slide – stock prices have been updated earlier in the presentation but not here. Time to check over everything again.2:00 AM – We’re done re-checking every single page for the same mistake now. Time to re-print.2:15 AM – The printers all have paper jams and are out of ink. Since it’s late, the printing/production crew has disappeared and I have become the production team.2:15 – 3:30 AM – I need to refill the ink and fix all the printers. This requires a group effort so I call some other analysts over to help.4:00 AM – Go home and go to sleep. I need to wake up by 6 to finish work on the presentation Associate #1 told me to “finish by the morning.”6:00 AM – I’ve overslept. Associate #1 is already up and has left 3 voicemails on my cell phone asking why I haven’t sent the presentation to our client yet. I Blackberry him that I was up all night working on another pitch and was going to send it by 9 but needed an hour of sleep first.6:15 AM – 6:30 AM – As I’m coming into the office we’re trading angry emails back and forth. He says I should have emailed our entire group saying that the presentation would be late.8:00 AM – Associate #1 strolls into the office just as I’m about to hit the “Send” button. I tell him that I’m about to send the presentation.He tells me to email everyone twice – once to tell them that they’ll get the presentation in the next 2 minutes, and then once again to actually send the presentation.

http://www.mergersandinquisitions.com/investment-banking-resume-no-work-experience/