When starting out as a new trader in stocks, knowing what follows after you begin trading can seem somewhat overwhelming. What type of certifications or licensing do you need? Can you trade without a license? Luckily, you don’t have to go in blind. Research is key to being successful in the stock market.

What Type of License Do I Need?

Image via Flickr by rednuht

Let’s say you’re interested in trading penny stocks. Penny stocks are stocks that trade infrequently and are not listed on a major exchange. Since these stocks typically offer small shares that trade for less than a dollar, they are known for their volatility. Knowing how to invest in penny stocks requires knowing whether you need a license. To answer this question, we ask two others: “What field are you looking at?” “Are you going to be a trader or a broker?”

Whether working as an individual or on behalf of a firm, a broker is someone who charges a fee to clients to buy and sell stocks on their behalf. A trader, however, is someone who individually buys and sells financial assets, either for themselves or for another individual or entity. If you have your own account and are trading only for yourself, you don’t need to have a stock trader license, although you would need to acquire one in certain situations.

Do You Plan to Work for a Firm?

If you are going to be employed in any position that requires you to buy and sell stocks, bonds, or any other securities, you will need to be registered with the Financial Industry Regulatory Authority (FINRA). You generally will have to start with obtaining a Series 7 license to gain any employment.

Would You Like to Be an Independent Broker?

Even if you decide to become an independent broker, you will still need to obtain a Series 7 license. Other licenses you may want to pursue as an independent broker include the following: Series 3, Series 31, Series 63, Series 65, and Series 66. These licenses can allow for a variety of services to offer potential clients.

What About Being a Trader on Wall Street?

Today, you can be a trader on Wall Street from almost anywhere if you have the clientele and the proper training. While trading for yourself in stocks can be as simple as doing the research, gaining employment on a higher level requires deeper education. Many traders on Wall Street have a four-year degree in math, finance, accounting, or another related field. Beyond this education, and in addition to the licensing discussed previously, traders on Wall Street also have a Series 57 license.

If you are trading only for yourself with no customer interaction and with your own account, you are not required to have a stock trading license. If you want to further your field of business or be a broker, either independently or through a business, you need to carefully consider licensing and other requirements before making other planning decisions.

Spread the love