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How to do Share Trading in Australia?

Based in Australia and looking to buy and sell shares online? Read our LearnBonds guide on share trading in Australia!
Kane Pepi
Author: Kane Pepi

Last Updated: September 2, 2020
Trade shares in Australia
Trade shares in Australia

Based in Australia and looking to trade stocks and shares online? There are many online trading platforms available that allow you to do this at the click of a button. Best of all, some online stock brokers are licensed by ASIC, meaning that your funds remain safe at all times.

In this article, we explore the ins and outs of how share trading in Australia works. We also discuss the best online stock brokers to do this with, and show you the steps required to get started with a share trading account today!

    How to Trade Shares in Australia in 3 Quick Steps

    Don’t have time to read our guide all of the way through? Below you will find three quick-fire steps to start buying and selling shares right now!

    Step 1: Open a Trading Account

    Open a trading account with a broker that offers stocks and shares.

    Step 2: Deposit Funds

    Fund your brokerage account using a credit or debit card, bank transfer, or e-wallet.

    Step 3: Buy Shares Today

    Decide how much money you want to invest, set up the trade, and place an order.

    Step 1: How to Pick a Shares Trading Platform in Australia?

    If you want to trade shares online, you will need to find a reliable broker that gives you access to the financial markets. Crucially, the trading platform that you sign up with must be regulated by a tier-one licensing body like ASIC or the FCA. Once you have assessed the regulatory standing on the broker, you’ll then need to look at other important metrics – such as fees, commissions, spreads, payment methods, and user-friendliness.

    With that in mind, below you will find some of the best Australian share trading sites of 2020.

    1. eToro - Best Share Trading Platform for Beginners

    eToro is a hugely popular online share trading broker that has amassed a client base that now exceeds 12 million traders. One of the main reasons for this is that eToro is tailored to the newbie investor. In fact, you simply need to open an account, deposit some funds, and that's it, you can start buying and selling stocks within minutes. Best of all, eToro does not charge any trading commissions other than the spread.

    In terms of what shares you can trade, eToro lists over 800 companies. This includes firms listed on major markets in the US, UK, and Japan - as well as less liquid exchanges based in Australia, Canada, and Sweden. You will also have the option of applying leverage and short-selling companies. In terms of getting started, eToro has a minimum deposit amount of USD $200, which is about AUD $300.

    You can get money into and out of the broker with plenty of Australian payment methods, such as a debit/credit card, e-wallet, or bank account. Once your deposit has been instantly processed, the funds will be converted to US dollars. While this does incur a small conversion fee of about 0.5%, this then gives you seamless access to the global stock markets.

    It is also worth considering the eToro Copy Trading feature. This allows you to choose a successful share trading investor at the site, and then copy their buy and sell orders like-for-like. You can do this with a minimum investment of $200 per trader. Finally, eToro is regulated on three fronts. This includes a license with ASIC, the UK's FCA, and CySEC of Cyprus.

    Our Rating

    • Trade shares commission-free
    • Regulated in Australia by ASIC
    • Wide range of markets and products
    • 0.5% currency conversion fee on deposits
    • eToro does not offer a desktop-based trading platform
    75% of investors lose money when trading CFDs.

    2. Plus500 - 0% Spreads on Share Trading

    Plus500 is a UK-based stock broker that hosts everything from stocks, indices, gold, oil, and interest rates. All of the assets available on the site are represented by CFDs, which means you will be able to trade with leverage. This stands at 5:1 1 on stocks, so a $300 account balance would allow a maximum trade of $1,500.

    Much like eToro, Plus500 does not charge any trading commissions other than the spread. You can get started with a minimum deposit of USD $100 (AUD $150), and supported payment options include a bank transfer, debit/credit card, or Paypal.

    There are no fees to deposit or withdraw funds. In terms of regulation, Plus500 is licensed by ASIC, the FCA, CySEC, and MAS (Singapore). Its parent company is also listed on the London Stock Exchange, so the safety of your funds should not be in question.

    Our Rating

    • Regulated by ASIC
    • 0% trading commissions
    • Mobile app available
    • No educational material
    75% of retail investors lose money when trading CFDs with this provider.

    4. AVATrade - Global Broker With Spreads Starting at 0.9 Pips

    AVATrade is a good option if you have a small amount of share trading experience, as the broker offers a wealth of advanced trading tools. This includes dozens of technical indicators and the ability to fully customize your trading screen. Best of all, AVATrade offers full support for MT4 and MT5.

    This is particularly useful if you are planning to trade stocks with an automated robot or EA system. When it comes to fees, AVATrade is super-competitive. This includes low trading commissions and spreads that start from just 0.9 pips. The platform also offers PAMM accounts, which will allow you to trade in a passive manner.

    AVATrade requires a minimum starting balance of just USD $100 (about AUD $150). It doesn't support e-wallets like Paypal, but you can deposit funds with an Australian debit/credit card or bank account. The broker is also heavily regulated, with licenses in Ireland, Canada, South Africa, Japan, and more.

    Our Rating

    • Spreads from just 0.9 pips
    • Multiple licenses
    • Both MT4 and MT5 supported
    • No fundamental research features
    • Its educational resources are sparse
    76.4% of retail investor accounts lose money when trading CFDs

    6. IG - Established Broker With Over 10,000 Financial Instruments

    Launched in 1974, IG is also a UK-based broker that is popular with Australian traders. The platform is home to more than 10,000 financial instruments, which includes thousands of equities. This includes stocks listed in the US, UK, Australia, Japan, Canada, and more.

    You will also have the option of opening a traditional share dealing account or stock CFD account. If opting for the latter, you will be able to buy and sell stocks with leverage. When it comes to the stock trading platform, you can choose from MT4 or the IG web-trading arena.

    Either way, you will have a wide range of technical indicators to assist your research endeavours. In terms of getting started, IG has a minimum deposit policy of USD $250 (about AUD $380), and it supports debit/credit cards and a bank transfer. Alongside other tier-one licensing bodies, IG is regulated by ASIC.

    Our Rating

    • Spreads from 0.6 pips
    • Supports MT4 trading platform
    • Excellent research department
    • 1% fee when using Visa and 0.5% via MasterCard
    • Spreads on some crypto pairs are somewhat expensive

    What are Shares and How do you Trade them?

    Before we get into the nitty-gritty of placing a trade, it is important for us to make the distinction between ‘buying traditional stocks’ and ‘share trading’. The former means that you will be buying stocks on a long-term basis. As you own the underlying asset, you will be entitled to dividends as and when they are paid. In the case of share ‘trading’, you will be buying and selling stocks on a short-term basis, with the view of making small, but frequent gains.

    Crucially, you will not own the shares that you are trading, as you will be utilizing CFDs (contracts-for-differences). In Layman’s terms, the stock CFDs that you buy and sell do not actually exist. On the contrary, the CFD trading instrument will merely track the real-world share price of the company in question. As we uncover further down in our guide, this does come with a number of benefits – such as being able to apply leverage, short-sell companies, and trade on a commission-free basis.

    With that said, it’s probably a good idea for us to outline a quick example of how share trading in Australia actually works.

    • You think that Apple shares are likely to rise in the coming 24-48 hours, so you decide to trade stock CFDs at a commission-free broker
    • The current price of Apple is $270.50
    • You place a ‘buy order’ at a total stake of $1,000 without leverage
    • The following day, Apple stocks close at $284.03 which represents a 5% increase
    • You decide to lock-in your profits by placing a ‘sell order’
    • On a stake of $1,000, your total profit is $50

    The above example illustrates that stock trading is a seamless process when utilizing CFDs. Not only were you able to enter and exit your position at the click of a button, but you did so in a commission-free manner. Once again, this is because stock CFDs merely track the share price of a company!

    What Risks are Involved with Share Trading in Australia?

    When you enter into a stock trade, only one of the two things can happen. In the example we gave above, where you placed a buy order on Apple shares, the value of the stocks went up and you made a profit.

    But, had the company’s share price gone downyou would have lost money. Crucially, no matter how many years you have been trading, there will always come a time when a trade goes against you.

    This is just the nature of the online investment space. With that said, it is super important to have a range of risk-management strategies in place.

    At the forefront of this is ensuring that each and every stock trade has a stop-loss order in place. This will close your position automatically when the trade goes against you by a certain amount.

    Share Trading Terminologies for Beginners?

    The online share trading space is filled with confusing terms that you may not have come across before. We think that’s crucial for you to learn what these terms actually mean, so we’ve outlined some of the most commonly used below.

    • CFDs: Although we briefly covered CFDs earlier, it is important to clarify. In a nutshell, if you want to buy and sell stocks on a short-term basis and target ultra-small gains, you will be doing so with stock CFDs. This means that you do not own the underlying asset, so you won’t be entitled to dividends.
    • Leverage: Leverage allows you to trade with more than you have in your share trading account. For example, if you stake $300 with leverage of 3x, this means that the value of your stock trade is actually $900. This has the potential of amplifying both profits and losses. Most ASIC brokers limits leverage on stock trading to 5x – unless you are a professional client.
    • Market and Limit Orders: When you place a stock trade online, you will get to choose from a ‘market’ or ‘limit’ order. The former means that you will be taking the next available price. Seasoned stock traders will typically opt for a limit order, as it allows you to specify the exact price that you want the order to be executed at.
    • Market Hours: Each stock exchange will have its own opening and closing hours. If you’re based in Australia, then you will be best suited for the Asian-Pacific markets. Although some online brokers allow you to trade outside of standard market hours, spreads are often super-high.
    • Spread: The spread is the difference between the ‘bid’ and ‘ask’ price of the stock. For example, if the spread amounts to a difference of 0.5%, then you need to make at least 0.5% just to break even. This is why you should focus on share trading sites that offer low spreads!

    What are the Best Tips When Trading Shares?

    If you’re still new to the world of online share trading, there are a number of tips we think you should consider prior to taking the plunge.

    This includes:

    1. Start Small

    Although you might be super-keen to get your share trading career started in the quickest time possible; take a step back and ensure you begin with low stakes. After all, if you have little to no experience of how stocks and shares work, mistakes are inevitable.

    Not only is this to be expected, but mistakes are actually the best way to learn and improve in the investment space. Crucially, as long as you are trading with super-low stakes, you will ensure that you do not blow your share trading account balance on day one!

    2. Avoid Leverage

    Unless you are a seasoned investor with years of trading experience, we would suggest avoiding leverage. Sure, leverage can amplify your profits and allow you to invest significantly more than you have in your account, but, it can also amplify your losses. In fact, you stand the very real chance of losing your entire account balance from a single trade – so avoid leverage until you are consistently making profits.

    3. Consider Social Trading

    Although a somewhat ‘outside of the box’ approach, it might be worth considering a Social Trading feature if you have virtually no experience of buying and selling stocks. For those unaware, this allows you to mirror the stock trades of seasoned investors.

    You simply need to choose an investor with a long-standing track record of making gains, determine how much you wish to trade – and the broker will take care of the rest. In an ideal world, not only will you be making money in a passive manner, but you will be learning the ins and outs of how a successful share trader operates

    What Not to Do When Trading Shares?

    While we have already considered the risks of applying leverage, there are a number of other things you should avoid when trading shares.

    This includes:

    • Chasing losses: One of the biggest barriers that you will face as an entry-level share trader is that of ’emotions’. This is because newbie traders are often unable to handle the emotions associated with losing money. In turn, we often find that inexperienced traders will then chase their losses by staking more than they ordinarily would. Ultimately, all investors lose money at some point, so just make sure you are emotionally prepared for this!
    • Listening to so-called ‘experts’: The internet is filled with so-called ‘expert’ investors that claim to know the ins and outs of the financial markets. In truth, rarely do any of these online commentators hold that ‘secret sauce’ you need to succeed in the share trading space. Instead, you need to learn how technical and fundamental research works so that you can make your own trading decisions!
    • Being a Jack of All Trades: With tens of thousands of companies available to trade at the click of a button, it can be tempting to try and be a Jack of All Trades. Sure, why trade ‘just’ the Australian stock exchange when you can also trade companies in Japan, Canada, Hong Kong, Singapore, the UK, and the US? The problem with this is that you will not be able to gain expertise in a particular marketplace. As such, it is much more effective to specialize in one or two exchanges.
    • Using unregulated brokers: It is crucial that you avoid brokers that do not hold a license with a tier-one body. Its license(s) should be with the likes of ASIC, the FCA, or CySEC. In doing so, your funds will be protected at all times.

    What are the Brokerage Fees on Australian Share Trading Accounts?

    If you want to trade shares online, you will need to use a stock broker. Providers are in the business of making money, so it makes sense that you need to pay some fees. This can come in a range of shapes and sizes – such as the spread, commissions, and non-trading fees.

    Here’s what you need to look out for:

    Spreads

    As we briefly noted earlier, the spread is the difference between the ‘bid’ and ‘ask’ price of a stock. But, in the world of CFD share brokers, this is displayed as a ‘buy’ and ‘sell’ price, which for all intents and purposes is the same as the bid/ask.

    Essentially, the difference between the buy and sell price will determine how much you are indirectly paying in fees. We say ‘indirectly’ because the spread is not actually deducted from your account balance. Instead, the difference between the two prices in percentage terms is how much you need to make just to break even.

    For example:

    • Let’s suppose that you want to trade Nike shares
    • The ‘buy’ price of Nike is $80.80
    • The ‘sell’ price of Nike is $80.00
    • The difference between the prices is 1%
    • At a spread of 1%, this is what you need to make just to break even

    Be sure to check what spreads the broker typically charges on shares before signing up!

    Trading Commissions

    Some, but not all, Australian share trading platforms will charge you a commission. If they do, this will be charged every time you place a buy and sell order – meaning you pay it at both ends of the trade. Trading commissions are usually charged as a percentage against the size of your order.

    For example, if the broker charges 0.5%, and the size of your buy order is $500, then you will pay a fee of $2.50. The good news is that Australian share trading sites like eToro and Plus500 do not charge any trading commissions on stocks.

    Non-Trading Fees

    You also need to explore what non-trading fees the broker charges. This might come in the form of a deposit/withdrawal fee, which can vary depending on your account type and chosen payment method. Additionally, most online share trading platforms will charge a non-activity fee.

    As the name suggests, this is charged when you do not use your account for a certain period of time, for example, one month. If the fee kicks in, your account balance will be debited each month until it reaches zero – so be sure to check this!

    Step 3: Choose a Shares Trading Strategy

    So now that you know what share trading entails, we now need to think about the types of strategies that seasoned investors take. The specific strategy that you decide to employ will be dependent on a range of factors – such as how much time you can dedicate to trading and whether you plan to understand the ins and outs of advanced market orders.

    Here’s an overview of the main share trading strategies used by experienced investors:

    • Day Trading: Day traders will hold on to stock positions for a number of minutes or hours, but rarely more than a day. The key objective is to profit from pricing movements throughout the trading day. This is with the view of making ultra-small, but frequent gains. You will need to dedicate substantial time to succeed day trading, as not only will you need to have a firm grasp of technical analysis, but you’ll also be placing buy and sell orders on a full-time basis.
    • Swing Trading: Swing traders take a medium-term approach to the stocks and shares space. While they will not be taking a long-term ‘buy and hold’ strategy, swing trading often sees positions kept open for days, weeks, and sometimes months. The overarching objective is to buy and sell shares when a medium-term trend is in the making. Then, when it appears the trend is coming to an end, the swing trader will exit the position.
    • Position Trading: If you are looking to buy shares and hold on to them for a number of months or years, then this would sit within the remit of position trading. Ultimately, you will have less interest in short-term pricing movements, and more interest in the long-term viability of the company. If you do decide to engage with position trading, then you are best off buying shares in the traditional sense, as opposed to utilizing CFDs. This is because you will be entitled to dividends.
    • Scalping: Scalping is the process of targeting micro share price movements when a stock is trading within a tight range. For example, let’s suppose that IBM has been trading between $100 and $105 for a number of weeks. A skilled scalper would place several buy and sell orders at both ends of the range, subsequently making profits until the consolidation period is no longer in place.

    Step 4: Open a Shares Trade

    If you’ve read our guide up to this point, you should now have a firm understanding of what share trading is, how it works, and what strategies and tips you need to consider before taking the plunge.

    With this in mind, if you are now ready to get started with share trading account, we are going to show you the step-by-step process with our top-rated broker eToro. If you want to use a different Australian share trading site, the following steps remain largely the same!

    Create an Account and Verify your Identity

    Open an account at eToro

    To get the ball rolling, head over to the eToro website and open an account. As the case with all online share trading platforms, you will need to provide some personal information, which includes your:

    • Full Name
    • Home Address
    • Date of Birth
    • Australian Tax Identification Number
    • Employment Status
    • Net Income
    • Net Assets
    • Contact Details

    As eToro is an ASIC broker, you will now be asked to upload some verification documents. If you decide to do this at a later date, you will be capped to a deposit limit of €2,000 (about AUD $3,300). You will also be prevented from making a withdrawal, so it’s best to get the KYC (Know Your Customer) process out of the way.

    As such, you’ll need to upload your:

    • Government-issued ID such as your Australian passport or driver’s license
    • Proof of residency via a utility bill or recent bank account statement

    We find that eToro is typically able to verify your documents within a few minutes.

    Deposit Funds

    Deposit funds at eToro

    Unless you are planning to use the eToro paper trading facility, you will now need to deposit some funds. The platform has a minimum deposit of USD $200 (about AUD $300).

    Supported payment methods include:

    • Debit Cards
    • Credit Cards
    • Paypal
    • Skrill
    • Neteller
    • Bank Wire

    Unless you are depositing funds with your Australian bank account, all other payment options are credited instantly. Take note, you will incur a small exchange fee of 0.5% when your AUD deposit is converted to USD.

    Trade Shares

    Share trading at eToro

    Now that you have a fully-funded eToro account that has been verified, you are good to place your first stock trade! If you have a particular stock in mind, enter it into the search box at the top of the page. If not, click on the ‘TRADE MARKETS’ button, followed by ‘STOCKS’.

    Once you have found a stock that you wish to trade, click on it. You will then be presented with an order box.

    Buy shares in Facebook at eToro

    Here’s what you need to do to get your shares trade placed:

    • Buy/Sell: Place a buy order if you think that the company will increase in value. Place a sell order if you think its share price will go down.
    • Stake: Enter the amount that you wish to stake in USD. In our example, we are buying $450 worth of Facebook stocks.
    • Leverage: If you want to trade with leverage, eToro permits up to 5x on shares. If not, leave this set at 1x.
    • Stop-Loss: To ensure you mitigate the risks of losing vast sums of money, set up a stop-loss order. Simply enter the price that you want your trade closed at.
    • Take-Profit: A take-profit order allows you to close a trade automatically when you hit a price target. This will prevent the need to sit at your device for hours-on-end waiting to close the position!

    To complete the order process, click on a ‘buy’ or sell’ – depending on which way you think the share price will go!

    Pros and Cons of Shares Trading

    Pros

    • Share trading platforms allow you to buy and sell stocks at the click of a button
    • There are thousands of publicly-listed companies that you can trade
    • Determine whether you think the company will go up or down in value
    • Some Australian brokers offer commission-free trading on shares
    • Ability to apply leverage on your chosen stock trade
    • Deposit and withdraw funds with a wide variety of Australian payment methods

    Cons

    • You need to dedicate ample time to learn how technical and fundamental research works
    • Most entry-level stock traders lose money

    Conclusion

    In a time not so long ago, the only way to buy and sell shares was to call a traditional stock broker over the phone, who would then manually place the trade on your behalf. Fast forward to 2020 and it is now possible to open an account, deposit funds, and place a stock trade in a matter of minutes. All of this can be done from the comfort of your own home and even a mobile device.

    With that said, it’s not as simple as placing a few share trades and generating a full-time income. On the contrary, you need to dedicate a substantial amount of time learning the ins and outs of how the stock markets work. If you feel you are ready to take the plunge, why not try using one of the commission-free, ASIC regulated brokers that we have featured on this page!

    eToro - Invest in shares with 0% commission

    Our Rating

    etoro logo
    • Trade Stocks, Forex, Crypto and more
    • Only $50 Minimum Deposit
    • Fully Regulated
    • Easy to Use Trading Platform
    etoro logo

    FAQs

    What stock markets can I trade in Australia?

    Depending on the Australian trading platform you use, you might have access to thousands of companies. On top of major markets in the US, UK, and Japan - this might also include companies listed in Australia, South Africa, Canada, Hong Kong, and more!

    How much does it cost to trade shares in Australia?

    This depends on your chosen broker. If you opt for a commission-free broker like eToro or Plus500, the only fee that you need to be aware of is the spread.

    What is the difference between stocks and shares?

    The two terms are used interchangeably in the online investment space (as we have done in this guide!). However, they actually refer to two different things. The 'stock' itself relates to the financial instrument. So, if you hold stocks in a company, then you own a percentage of the firm at an amount proportionate to your investment. In the case of 'shares', this relates to the number of individual stocks that you hold. For example, if Apple has a stock price of $200, and you invest $800, you will own four shares!

    Can Australians buy shares with leverage?

    You certainly can - but you will be trading stock CFDs. This means that you will not own the underlying asset. There are no leverage limits imposed by ASIC, but most regulated brokers will cap this to 5x if you are newbie trader.

    All trading carries risk. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
    Kane Pepi

    Kane holds academic qualifications in the finance and financial investigation fields. With a passion for all-things finance, he currently writes for a number of online publications.