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Broker Vs Trader – whats the difference?

On the surface, it may seem as though brokers and traders are two of the same, particularly as both involve the act of buying and selling securities. However, there are crucial differences between the two – and two entirely different career paths. Let’s examine the key differences between the two.

What does a broker do?

A broker usually works on behalf of their own clients, buying and selling securities that are in the best interests of their clients’ pockets and financial investments.

Brokers are also described as sales agents as they may work for a brokerage firm, but it’s not unusual to see a self-employer broker either. But for those that do work in a company, a broker’s main responsibility is to obtain clients by cold calling, hosting seminars and drawing potential clients to the firm. Their second main priority is to then maintain these clients by adhering to their wishes.  A client may have a specific financial goal which the broker is tasked to assist with.

Brokers with an established reputation may also act as financial advisors to their clients, helping with retirement plans, real estate ambitions and general portfolio diversification. The end goal really is just to make as much money as possible for themselves and their customers.

The type of stocks brokers deal with can vary – from equities and bonds to mutual funds, ETFs and even options contracts. A broker’s salary can also vary depending on where in the UK they operate form and if they hold a high reputation. For instance, working in The City, London, a broker can earn anywhere between £32,000 to £57,500. The average salary for a broker across the UK sits at around £37,338.40.

What does a trader do?

A trader tends to represent and work within a financial investment firm, bank or exchange. There are many large investment management firms across the country, though the most are again congregated in the capital of the UK.

Moreover, traders are tasked with buying and selling securities on behalf of the assets managed by their employer. They take notes and direction from the demands of a portfolio manager, though they may operate in different markets similarly to that of a broker. Stocks, debt, derivatives, commodities and Forex are just some of the markets a trader will operate in, and some may even specialise in a particular class.

Again, traders manage clients’ accounts, but they are also responsible for creating investment strategies and proposing these ideas to try to make more money for the client, and thus the firm.

Which role is right for me?

To choose which role is right for you, you should consider the following:

A broker will spend a significant proportion of their day just looking to expand their client base. They continue to liaise with their clients throughout the duration of the trading day and keep them informed of stock prices which may fluctuate or vary. Brokers also have to conduct their own analyst research to mitigate against any dramatic and volatile movements in the market to safeguard their clients from losses.

Traders, on the other hand, spend the vast majority of their time with their head buried in analysis. They talk a lot less to their clients compared to brokers, and instead read from performance reports, computer analysis and look at innovative trading strategies. They still speak to key clientele on the phone and liaise with management, but they are primarily concerned with data and trends.

Traders are also typically drawn into the career path based on their passion for finance and their natural flair in the stock market. They’re interested in following the movements of the market and compiling or sharing the data. And while brokers do share these similar interests too, a broker is an individual who is more likely to prefer dealing with clients on a one-on-one personalised basis.

Nevertheless, both roles are fast-paced and high pressure with the potential of becoming a lucrative career. There is scope to work all over the world – and no type is better than the other for the opportunities it brings.

How to learn financial trading

To become a broker or a trader, you clearly need some degree of financial education. You have to be able to speak and act confidently when investing in the stock market, particularly as you’re moving other people’s money which is a huge responsibility.

Once upon a time, trading was a self-taught industry that was built on meritocracy and hard work. However, a four-year related degree in finance, economics, business or a STEM subject is absolutely an advantage if you want to work on behalf of a financial company or firm. Competition can be rife in the trading sector, so anything you have under your belt that puts you ahead of your peers is beneficial.

That said, it’s not impossible to get your foot in the door and on the trading ladder if you don’t have a degree. There are plenty of online and accredited financial trading courses which can break you into the industry – and at the very least you are required to sit and pass exams in order to be a broker.

A financial trading course can teach you all you need to know about working as a broker or a trader. You can learn cryptocurrencies, statistical and mathematical skills and various trading strategies. Courses can start from Level 3 and go all the way up to a Level 5 Diploma in Financial Trading – which is the qualification you will really need to learn and ultimately enter the investment or trading workforce.

Other ways to learn about trading

Although you need a Level 5 diploma to play amongst brokers and traders, you can also learn in your spare time by reading magazines like The Wall Street Journal and the Financial Times. Throw yourself at any similarly related work experiences too, like sales and accounting jobs.

With the right balance of experience and education, you can rest assured that you’re on the right path to becoming a broker or a trader.

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