Individuals or firms trading as their principal capacity are called stock traders or simply traders. The stock trader is usually a professional. Many people across the world can call themselves stock traders/investors or part-time stock traders/investors, despite having another profession in parallel with their regular trading activities in the financial markets. When a stock trader/investor has clients, and acts as a money manager or adviser with the intention of adding value to his clients finances, he is also called a financial adviser or manager. In this case, the financial manager may be an independent professional or a large bank corporation employee. This may include managers dealing with investment funds, hedge funds, mutual funds, and pension funds, or other professionals in equity investment and fund management. A very active stock trader who holds positions for a very little time and makes several trades each day is a day trader. Other broad designations for different kinds of stock traders include the terms: speculator, hedger, arbitrageur and market maker.


Speculation: Speculation is the buying and selling with a view to making a profit. In general term is used for the activity of those who trade in the commodities and currency markets for their own sake, as district from those who trade in them because requires that they do a manufacturer of instant coffee or an importer who has agreed to pay for goods in a foreign currency.To be successful, speculators rely on a number of things. Speculators must also make judgments by taking a view on events.

Arbitragers: Arbitragers is undertaken to make profit out of the differences in prices of a security in two different markets. It is a highly skilled speculative activity. If the price of a certain security is higher in one market than in another, the speculative will purchase that security in the cheaper market with a view to selling it at a profit in another market and thereby to reap huge profits. The speculator has to act very quickly since the prices are highly sensitive and they may be equalized within a very short period. Since, Arbitrage involves carrying of a security from one market to another, it is also described as traffic in securities. Such traffic may be carried on between two markets within the country or in two different countries. The former one is called domestic arbitrage and the latter foreign arbitrage. Ultimately, arbitraging has the effect of equalizing the prices of a security at different places, and thus, it is beneficial to the market.


Cornering: Cornering refers to the process of holding the entire supply of a particular security by an individual or a group of individuals with a view to dictating terms to the short sellers and earning more profits. When the entire or a major share of supply of a particular security is held by an individual or group of persons, the short sellers who have contracted to sell the security without actually possessing it, would be unable to deliver it to the buyers who have cornered the market. In such a case, the buyers will be able to dictate terms to the short sellers and get good profits. In a technical sense, the short sellers will be squeezed through cornering. It is also a prohibited activity.


Rigging the market: Rigging refers to the process of creating an artificial condition in the market, whereby, the market value of a particular security is pushed up. It is due to a strong bull movement as a result of which the demands of the buyers push up the price. Speculators holding bulk of such securities buy and sell to make a market and finally sell their holdings gradually to get huge profits when the prices rule high in the market. It is also not a desirable activity since it prevents the free interplay of demand and supply.


Hedging: Options can be used for the purpose of hedging also. Hedging is a device through which one can protect himself against losses due to price fluctuations of securities. For instance, a bull speculator may agree to purchase certain securities at a certain price. At the same time, he may hedge himself by buying a put option so that any loss that he may suffer while purchasing the securities as per his original contract may be compensated by the exercise of his put option.


Margin Trading: Margin trading is carried on by the clients with funds borrowed from their brokers. It is a popular method of speculative trading. Under this method, the client opens an account with his broker. He makes a deposit of cash or securities in this account. He also agrees to maintain a minimum margin of amount always in his account. When a broker purchases securities on behalf of his client, his account will be debited and vice versa. The debit balance, if any, is automatically secured by the clients securities lying with the broker. In case it falls short of the minimum agreed amount, the client has to deposit further amount into his account or he has to deposit further securities. If the prices are favourable, the client may instruct his broker to sell the securities. When such securities are sold, his account will be credited. The client may have a bigger margin now for further purchases. It is not an undesirable activity since it acts as a check against excessive speculation. It is so because fresh purchases have to be supported by fresh deposits unless there is excessive margin in the account. It rarely happens. Moreover, the brokers investment is safe since it is backed by clients securities.


Blank Transfers: Blank transfers facilitate speculative activities through carry over or badla transactions. When the transferor simply signs the transfer form without specifying the name of the transferee it is called blank transfer. Badla transactions involve temporary purchases and sales of securities. It they have to be registered, it involves a lot of inconveniences due to registration fees, stamp duty. To avoid this, blank transfers are increasingly used in carry over transactions.


Bank transfer is also an undesirable activity due to the following risks:

i) If the shares are partly paid up the sellers liability for the uncalled portion continues even after he has actually sold them. It is not justifiable.


ii) The blank transferee escapes from the payment of stamp duty, transfer fees, which means a loss of revenue to the Government.

iii) The blank transferees name is not disclosed. So he can evade income tax also.

iv) It also enables the blank transferees to gain control of the management of companies without actually disclosing their names.

v) The blank transferees name will not be recorded in the register of companies. So, the registers are incomplete and they give misleading information to prospective investors.

vi) Registered shares are made freely negotiable through blank transfers. So it encourages unhealthy speculation. Due to these unhealthy consequences, blank transfers are not prohibited.