What Is the Difference Between a Broker and a Trader?

Diving into investing can be a daunting task for those unaccustomed to the rapid-fire pace of market analytics, ticker prices, and Wall Street jargon. It leaves many stock-market hopefuls rethinking their choice to get involved at all and drives many would-be investors to search for help. This search creates the confusion between financial services and the professionals who offer them.

For many, the confusion consumes their thoughts about the stock market, investing, and growing a portfolio. Most new investors don’t know where to start. Should they hire a professional, go it alone, or sign up for an online class from a professional market analyst? There is no wrong way to get into saving for your future, and with easy-to-use stock and trading platforms introducing new educational capabilities for novices in recent years — expanding to include new products such as options and cryptocurrencies — anyone can invest in the market. For more experienced traders, even barebones operations like Robinhood offer fee-free trading but with somewhat limited access from a mobile device that may serve to hinder those accustomed to or prefer a large desktop setup for their trading. Constructing the most appropriate approach for your money is all about doing your homework. There is no wrong way to save, but there is a “best” way.

What is a broker, exactly?

The first thing to consider when contemplating your investment strategy is how to approach using a broker. Brokers can represent a few different things, and there is an important distinction to understand. Financial professionals are brokers, but so are the platforms that they (and you will) use to complete trades. The simple truth is that you have the ability to buy and sell without the help of a personal broker, but you do require access to the market through a brokerage firm.

The confusion lies in the idea that an individual other than yourself must handle your money. Not only is this inaccurate, but a thorough understanding of this complex relationship also can serve as a great starting point for those looking to expand their investing career. It is frankly not difficult to become a professional in the investment arena, yourself, and an option that financial savvy investors should take a hard look at.

While this may serve as the simple answer for many looking to dip their toes or dive further into the world of investing, it is not enough for everyone. Trading in its many varieties is a career for thousands of professionals across the country (nearly 4,000 of which are registered stockbrokers), and getting into professional investing is as easy as completing Securities Training course and building up your chops in the market’s major sectors.

Consider stock options to bolster your returns

While the traditional buying options are a great way to start out as either an individual investor or as a brokerage hopeful, other financial vehicles should be explored by anyone hoping to strike oil in the financial market. Options trading is another way to maximize your investment opportunities. It involves a simple strategic choice about the future movement of a stock’s price. These trades involve the same market analysis as regular market buys, but can increase the value of your portfolio exponentially with a sound investment strategy. Of course, options trading for beginners is not out of the question either. While aggressive trading moves should probably be avoided for those without well-developed market instincts, options trading serves a different purpose.

Options do exactly what they seem — by buying an options contract, you invest a small amount to effectively “freeze” the price and check your options later. These are great investments for individuals concerned that a price might tank and want to hedge their bet. Likewise, if you believe the price of a stock is going to skyrocket then buying a “call” will allow you to purchase the stock below market value down the road when your instinct pans out. As well, options can be a low risk investment for seasoned stock buyers because you also have the option to walk away without buying or selling, or selling the contract to another investor altogether.

Investing strategies come in all shapes and sizes, and your interaction with the market can take innumerable forms. Make sure you are engaging it in the best form for your personal mix of risk and commitment in order to ensure that your financial instruments are working for you and not the market.

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