What Is Stock Jobbing?
Stock jobbing is an outdated term that means making quick profits on small moves of a stock, largely based on the principle of market making. The term is mostly out of use and comes from a British slang term for certain financial market participants.
The more current terminology for this similar kind of market activity would be scalping, day-trading, or high-frequency trading (HFT). All of these terms refer to behavior that is similar in principle to what stock jobbers did on the London Stock Exchange (LSE) before 1986. Computerized and other modern trading practices have obscured this similarity.
- This term is British slang for the roles market makers played in London before the 1980s.
- The term is far less frequently used now, but refers more generally to day trading or scalping.
- Jobbers were usually defined by their disposition toward the market as either bullish or bearish.
- High-frequency trading (HFT), in many ways, is analogous to what stock jobbers did, though technology has changed the dynamics of this process greatly.
- Jobbers, unlike brokers, trade for their own accounts in a speculative manner.
Understanding Stock Jobbing
Stock jobbing is a British slang term for short-term day trading where the trader tries to make frequent small profits. The term comes as a generalization in reference to the work done by stock jobbers. These individuals were actually market makers on the London Stock Exchange before October 1986, when London's financial sector was deregulated.
Up until that time stock jobbers (or simply jobbers) were in the business of taking the opposite side of investors' or traders' orders and/or matching such orders up to other investors or traders wanting to take the opposite position. The regulations and protections afforded stock jobbers during most of the 20th century and before made this a fairly lucrative business since all they had to do was process orders and capture a substantial spread (based on fractions instead of decimals). The market eliminated this kind of work in favor of more efficient transaction mechanisms enabled by computers and electronic trading.
But the term stock jobbing persisted as a way of describing any market participant who was looking for a quick turn of a profit in small fluctuations of price. Floor traders, proprietary day traders, and even high-frequency traders could be labeled with the term stock jobbers today.
While some people often confound stock jobber and stockbroker, a jobber trades with their own accounts while a broker executes trades on behalf of customers.
How to Be a Stock Jobber
While most investors assume it is better to seek value through long-term investments, stock jobbing (day trading) takes on a more speculative short-term goal. As opposed to using fundamental analysis and selecting investments that professionals believe are likely to grow in price over time, the short-term trader seeks to identify and take opportunities to make quick, small profits and replicate that procedure with as great a frequency as possible.
Stock jobbers will often use technical analysis to generate short-term gains. High-frequency traders are the most modern version of stock jobbers because they seek to identify, fill and match orders in tiny fractions of a second. The profits made by these firms might be extremely small for any given trade, but this kind of trading is based on the premise that one can identify markets with such high volume that many trades can be done within a single minute.
Stock jobbers need to be disciplined and need to stick to their trading regimen very closely. Any decision that needs to be made should be done so with certainty. But jobbers should also be very flexible because market conditions are very fluid and if a trade isn't going as expected, they'll need to fix the situation as quickly as possible without incurring too much of a loss.
Frequently Asked Questions
What is the difference between a broker and a jobber?
A stock jobber refers to an individual who places bets in the market with their own money, often synonymous with day trading or scalping. A stock broker, on the other hand, acts as an intermediary for customers to transact in markets, earning a commission or fee for facilitating and executing trades on the customers' behalf.
What are three types of stock jobber?
In general, a jobber can be described by their market outlook. A bull is one who thinks the market will rise and purchases stocks taking long positions. A bear, in contrast, suspects prices will go down and instead sells assets to take short positions. A third type of jobber, the "stag" operates mainly in primary markets, investing in private placements before a company goes public via an IPO. The stag helps promote the new issue and creates buzz. A stag may also refer to a jobber who is a short-term day trader.
Were stock jobbers always found on exchanges?
While the term "jobber" has fallen out of fashion, day traders and high-frequency traders fit the bill of a jobber. And, historically, jobbing has always been a feature of the markets. The classic markets novel, Reminiscences of a Stock Operator, for example, is an early 1920s account of stock jobbing via so-called "bucket shops" where short-term positions were taken in stocks based on ticker tape readouts.