What's the difference between a trader and stock broker?

Question

I know this is a stupid question, but my son has a masters in finance and he has accepted a job in Chicago as a trader. He will be trading commodities. Can anyone help his poor momma understand this. He's tried, but he speaks in another language...I don't get. I was an English major and not very tecnically inclined. Appreciate it.

Answer 1

Generally a trader sits in a room with many other people in front of a screen and uses his company's money to electronically buy and sell financial products like stocks or bonds or as you stated commodities. Commodities can be things like food, or metals - so, for example, if you thought 6 months down the road there was going to be a big storm that was to wipe out a coffee crop then you would buy large quantities of coffee (on paper) hoping that you will be able to sell them for a profit in the future.

Stock brokers tend to be more client driven. So you sit in an office by yourself or with a small team and you try to get private individuals to buy stocks in company like GM or Apple or Chevron, and charge a commission to that person (to buy or to sell). the more buys and sells you do the more commission you generate and the richer you get (or so the story goes)...

Answer 2

Ask your son again. He can explain it in plain english unless he intentionally tries to make the whole thing more complicated than it is.

Theoretical finances are not difficult to understand although quarter reports usually are since they are not standariced.

Answer 3

A stock broker is an employee of a brokerage firm and their purpose is to help clients with their current investments or assist them in making new investments; to provide market information, and keep investors abreast on any market information that may effect them.

Stock brokers are really sales people, they try to sell investments that their company recommends, they try to solicit new customers for the company, and to provide instructions on various investments products and terms used by the industry.

Stock brokers are paid commissions and the orders that they help the customer generate.  Commissions are usually a sliding schedule and differ for each product they sell (stocks, bonds, mutual funds etc)

Traders use the firm's money (capital) to trade commodities for the firm's account.  They will buy and sell and are expected to make a profit on each trade they do.  

Many traders are paid salaries, and often share in the profits that they can generate (the profits are off-set by any loses that they have), but they can make a very good living at what they do.  The pace that they work is very fast, and they're expected to keep up with it or they are out.

Of the two positions, the stock broker, according to the general public has a very prestigious position and the trader lives a very fast pace life.

In the industry, the trader has a lot more respect because he has to think fast, alway be accruate, and trade very well, while the stock broker is often considered the dumbest thing walking upright..  You'll find in this business, the stock brokers often put on a better front and show, while the trader, O well, let's not go there.

Mom should be very proud of her son, there are many young people would be very envious of his new job.  Not only will he use his education every day, but the better he becomes the more respect he can earn.

Some day Mom should sit him down and make him explain exactly what he does, he may be a smart guy, making tons of money in a fast pace business, BUT mom's still mom