Man climbing a rope
A local trader is a person who participates in the financial markets for the purpose of buying and selling securities on their own account, rather than acting as a representative for investors. Several terms are used to refer to local dealers, including registered dealer, competitive dealer, and trading floor. These traders help maintain liquidity in financial markets, although they contribute a relatively small percentage of global trades, with most trades involving institutional investors working at very high volume.
In some markets, regulations govern the activities of local merchants. Many require that 75% of their trades be of a stabilizing nature, which means they must sell bonds when prices are in an uptrend and buy when prices are in a downtrend. In some cases, a local trader may act as a dual trader, either representing itself or executing trades on behalf of others. Concerns about conflicts of interest in double trading often lead regulators to closely track the activities of such traders, monitoring them for signs of illegal or questionable activity.
With the advent of electronic trading, it has become very easy to be a local trader. People can connect directly to trading systems to buy and sell securities without a broker as an intermediary. In markets where open outcry trading is still practiced on the trading floor, people can also enter and trade directly, after meeting the requirements set by the exchange. It is often necessary to buy a spot on the stock exchange to trade, and people may need to pass a certification exam to be allowed to work as a local trader.
The risks for local traders can be considerable if they are unfamiliar with the market or if they do not do good research. Although your losses are limited by the small size of your trades, a bad trade can still bankrupt an individual trader even if the market as a whole is not affected. Local traders must keep track of multiple sources of information as they work, and often spend extra hours on analysis and research so they can trade more effectively when markets are open.
There are no special educational requirements for a local trader and many people only have high school diplomas. It may be helpful to have experience with a trading company before branching out independently, although this is not mandatory. A solid understanding of the markets, along with the ability to think critically and analyze information carefully, is very helpful, as is aggression and quick thinking.