What is a floor trader and how they make money?

In the stock exchange, the term ‘floor trader’ is a common one. The trader who executes trades on the floor of the exchange for his own account is referred to Floor Trader. Generally, the traders attempt to make a profit from the short-term price swings. They trade securities or derivatives on the trading floor. There are three different ways by which one can trade, one can go through floor trader, floor broker or invest personally. In order to become a floor trader, one has to abide by certain rules and regulations of the stock exchange. The traders also refer to a ‘local’.

Before step into the main content, one thing should be clear to all that floor trader and floor broker are two completely different aspects. We’ve already stated that trader trades for themselves. Now, let’s come to the term ‘floor broker’. Some of the people don’t have the time to constantly monitor the market movements and stock fluctuation. Hence, they generally hire a trading firm to execute their investments, maximum trading firms have its own floor brokers who invest according to the client’s desire.

Simply, a floor broker is different from a floor trader mainly for one reason, floor broker performs trades on behalf of the investors or client while traders engaged in trading for their own account. The traders are known as ‘local’ but the brokers are known as ‘pit broker’.

Features of Floor Trader:

  • The trader is an investor himself.
  • The trader works on the floor of the stock exchange, making the investment for his own portfolio.
  • He can make his independent decision regarding investment.

floor trader

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Limitation: 

In the advanced age of the computer, the requirements of floor trading become fade. Computerize system become active in the market. The system becomes easier to access. Therefore, the importance of floor trading is decreased.

However, for trading on the floor, one must acquire certain basic fundamental and technical knowledge of the stock market. The traders can trade themselves independently.

Ankita is a graduate in English language and she has also done her MBA from the Calcutta University. She has a high knack in the stock markets. An experienced stock market content writer Ankita is also trading on her own account. Ankita is also preparing for the NISM Research Analyst Series XV examination seriously.



Categories: Stock Market Basics, Trading Strategy

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