A stock trader conducts transactions involving stocks and derivatives, often for publicly traded companies, and may use technical or fundamental analysis. They may work for a company or be self-employed, and need experience and a degree, as well as a license to work in the industry.
In essence, a stock trader carries out various transactions involving stocks and other stock-based financial products, also called stock derivatives. Basically, stocks are shares or shares of companies. Most of the time, the stock trader deals in shares of publicly traded companies listed on a stock exchange. In some cases, however, he or she may conduct over-the-counter (OTC) transactions. These are normally traded and traded privately, i.e. without the involvement of a stock exchange.
Depending on the company the trader works for, he or she may be responsible for executing buy and sell orders under the direction of a portfolio manager. If the professional does not work directly under a portfolio manager, he or she may trade with outside investors. This can include individuals, pension funds, asset management companies and others. Sometimes traders trade stocks using the funds of the company they are employed with. Other times, stock traders are self-employed and therefore trade for themselves, risking their own capital.
Companies that are housed with stock traders typically structure the commercial department in a type of hierarchy. Generally, from top to bottom, the positions are as follows: senior operator, middle operator, and junior operator. Consequently, most advanced stock trading will be done by senior and sometimes middle traders. Junior traders typically handle relatively simple transactions. Furthermore, the senior stock trader is usually tasked with designing trading strategies and ensuring that subordinates carry out trades according to plan.
Before making trades, a stock trader can use technical or fundamental analysis, or both. Technical analysis mainly involves reading charts from which the trader can deduce the next likely price movements. On the other hand, fundamental analysis involves evaluating the underlying pros and cons of a company, which will give the trader reasons to buy or sell its stock.
The most common stock derivatives that traders work with are instruments known as options. In a basic sense, they give the trader the option to buy or sell a specific stock at a certain price within a certain period of time. In addition, the merchant may handle over-the-counter transactions, which he or she normally performs through a network of connected computers and telephones. On this network, the trader can trade with other traders to buy or sell stocks.
To break into the stock trading career at the junior level, you usually need about three years of experience in a trading position. The intermediate level typically requires around four to six years of experience. Finally, senior positions go to candidates who have at least six years of experience in their activities.
Additionally, to qualify for most stock trading jobs, applicants are typically required to have at least an undergraduate degree. These include degrees in mathematics, computer science, finance and economics. In order to work in a company, a stock trader usually needs to have a license. In the US, for example, an example of such a license is what is called a series 55 license. Also, to move up the ladder in a company, one usually has to work hard and get a graduate degree and sometimes take exams for obtain industry-specific certifications.
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