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What is share market trading and how does it work?

A dummies guide to investing in the stock market.

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Kylie Purcell

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Jacob Joseph
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We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!

When you trade shares, you’re buying and selling a portion of a company with other traders. These trades occur over a digital marketplace known as the stock market or stock exchange. In Australia, we have the Australian Securities Exchange (ASX), and in the United States, there’s the New York Stock Exchange (NYSE) and the NASDAQ.

Learn more about share market trading in this guide.span

Share Trading Account Offer

eToro (global stocks)

USD 0

Standard brokerage - US shares

Share Trading Account Offer

Get $0 brokerage on US, Hong Kong and European stocks with trades as little as $50 when you join the world's biggest social trading network.

  • $0 brokerage for US, Hong Kong and European stocks
  • Trades starting from $50
  • Fractional shares
  • Copy top traders
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Important: Share trading carries risk of capital loss.

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Disclaimer: Trading CFDs and forex on leverage is high-risk and losses could exceed your deposits.

What is stock trading?

When you trade stocks, you're essentially buying and selling the underlying asset of a company with the goal of making a profit. Each share has a price and it is determined by the supply and demand of the company's shares in the market, based on its present or predicted future performance.

Usually, when a company is performing well, more investors will want to buy its shares and its share price goes up. Conversely, if a company is underperforming and failing to deliver good profits, shareholders may decide to sell their shares.

What is the stock market?

Also called a stock exchange, a stock market is where investors trade shares in companies. Australia is home to a number of exchanges. Stocks in the biggest companies in Australia are traded on the Australian Securities Exchange (ASX) however there are two smaller exchanges known as the CHI-X and the National Stock Exchange of Australia (NSX).

Some of the biggest overseas exchanges include the London Stock Exchange, the NASDAQ, the New York Stock Exchange (NYSE), the Japan Exchange Group and the Shanghai Stock Exchange. These can be accessed from Australia by using an international stock broker.

How does online share trading work?

Although there are physical stock exchanges, shares are purchased and sold online. To trade shares, you need a stock broker to act as an intermediary to the stock exchange.

A broker can be a full-service broker or an online broker. As well as place trades on your behalf, a full-service broker can give you advice about which shares to trade. An online broker is an online software platform which lets you execute trades yourself.

Online brokers are a low-cost option compared to full-service brokers. If you don’t want to go down the path of using a full-service broker, you can use share trading software to help you learn about which shares to trade, in addition to an online share trading platform to make trades.

Compare share trading accounts below

1 - 10 of 10
Updated regularly
Name Product Standard brokerage fee Inactivity fee Markets International
eToro (global stocks)
eToro (global stocks)
US$0
US$10 per month if there’s been no login for 12 months
Global shares, US shares, ETFs
Yes
Zero brokerage share trading on US, Hong Kong and European stocks with trades as low as $50.
Note: This broker offers CFDs which are volatile investment products and most clients lose money trading CFDs with this provider.
Join the world’s biggest social trading network when you trade stocks, commodities and currencies from the one account.
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More Info
ThinkMarkets Share Trading
Exclusive
ThinkMarkets Share Trading
$8
No
ASX shares
No
Exclusive: Sign up through Finder and get 3 months of free trading up to 50 trades. Offer available to new customers only.
Following your first three months, enjoy $8 flat fee CHESS sponsored brokerage as well as free live stock data all from the convenience of an easy-to-use mobile app
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More Info
IG Share Trading
Exclusive
IG Share Trading
$5 – 8
No
ASX shares, US shares, UK shares, ETFs, and more
Yes
Exclusive: Finder customers who apply for a share trading account in June will be able to trade Aussie shares from $2.50 commission until the end of August. T&Cs apply.
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, plus get access to 24-hour customer support.
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More Info
Tiger Brokers
Exclusive
Tiger Brokers
$6.49
No
ASX shares, Global shares, Options trading, US shares, ETFs
Yes
Exclusive to Finder: Sign up to Tiger through Finder and on completion of your first deposit of any amount or transfer of shares receive 4 extra free grab shares. T&Cs apply.
Get started with $0 brokerage on ASX and US stocks for the first 3 months upon completion of your first qualifying deposit. Also receive a free Apple share if you deposit $3,000 or more.
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More Info
SelfWealth (Basic account)
SelfWealth (Basic account)
$9.5
No
ASX shares, US shares
Yes
Trade ASX and US shares for a flat fee of $9.50, regardless of the trade size.
New customers receive free access to Community Insights with SelfWealth Premium for the first 90 days. Follow other investors and benchmark your portfolio performance.
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More Info
CMC Markets Invest
CMC Markets Invest
$0
No
ASX shares, Global shares, mFunds, ETFs
Yes
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 35,000 products, including shares, ETFs and managed funds, plus access up to 15 major global and Australian stock exchanges. Plus, buy Aussie shares for $0 brokerage up to $1,000. (Limited to one buy order per stock per trading day).
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More Info
GO Markets Share Trading
GO Markets Share Trading
$7.70
No
ASX shares, Forex, CFDs, ETFs
No
Zero Brokerage on your next 50 trades!
Simply transfer an existing HIN before 30 June and pay no fees on your next 50 transactions. Alternatively, transfer your existing shares and receive 5 transactions at zero cost for each shareholding transferred, once again up to 50 free trades. T & Cs apply
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More Info
Saxo Capital Markets (Classic account)
Saxo Capital Markets (Classic account)
$5
No
ASX shares, Global shares, ETFs
Yes
Access 22,000+ stocks on 50+ exchanges worldwide
Low fees for Australian and global share trading, no inactivity fees, low currency conversion fee and optimised for mobile.
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More Info
Bell Direct Share Trading
Bell Direct Share Trading
$15
No
ASX shares, mFunds, ETFs
No
Get $300 free brokerage until 30 June when you move to Bell Direct. T&Cs apply.
Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.
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More Info
Superhero share trading
Superhero share trading
$5
No
ASX shares, US shares, ETFs
Yes
Sign up & fund your account with A$100 or more and receive US$10 of Tesla stocks on Superhero. T&Cs apply.
Enjoy $0 brokerage on US stocks and buying ETFs as well as a flat $5 fee to trade Australian shares.
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Compare up to 4 providers

Important: Share trading can be financially risky and the value of your investment can go down as well as up. Standard brokerage is the cost to purchase $1,000 or less of equities without any qualifications or special eligibility. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

How can you make a profit from share trading?

There are three ways to make money from share trading: capital growth, dividends and tax concessions.

Capital growth

This is the most common way to make money from share trading. This is simply where you sell shares for more than you paid and get a profit.

Dividends

This is when the directors of a company chooses to pay company profits to shareholders. Dividend payments are based on the number of shares you own. These types of shares are called income shares. Not all companies pay dividends, and directors can reinvest profits to grow the company rather than pay a dividend. These types of shares are called growth shares.

Tax benefits

A share can be fully franked. This is a term to describe when a company has already paid tax on your dividends. You can use franking credits to reduce the tax you pay on other income.

What are the different types of shares?

You can trade these types of investments using online share trading platforms or through a broker.

Australian securities

This type of stock is publicly listed on the Australian Securities Exchange (ASX) or the National Stock Exchange of Australia (NSX). Shares in the top 200 Australian companies are traded on the S&P ASX 200.

International securities

You can also trade on overseas markets. You can trade shares in some of the biggest companies in the world from Europe, Asia, the U.S and London.

Managed funds

Managed funds and exchange traded funds (funds that are listed on a stock exchange) are investment tools you can use to access multiple assets, including shares, property, commodities and derivatives.

What are the benefits of share trading?

Share trading can make you money in the short term and the long term, plus they present tax benefits for investors.

    • Liquidity. Shares are a liquid investment. You get your money two days after you make a trade.
    • Capital growth. Shares have proven to be a solid investment for long-term capital growth.
    • Tax. You may be eligible to receive a discount on any capital gains tax if you’ve held the shares for more than 12 months.
    • Shareholder rights. When you become a shareholder, you can vote on company decisions and attend annual general meetings (AGMs).

Compare share trading accounts

What are the risks of share trading?

Share trading is a way to make money. Generally speaking, the greater the potential gains, the greater the risk – share prices can rise and fall quickly.

  • Volatility risk. Shares can be a volatile asset. The price can rise and fall quickly depending on a number of things such as good or bad company performance, company announcements and performance of the market.
  • Timing risk. The share market moves in cycles. Buying shares in a bull market is no guarantee of future performance.
  • Government risk. Laws can change and this can impact your share price and investment strategy.
  • Overseas risk. Investing in international shares exposes you to risk from currency fluctuations and foreign governments.

Share trading jargon lookup

  • Blue chip. Companies that have a proven record of growth, for example Commonwealth Bank, BHP Billiton and Telstra, are blue-chip shares.
  • IPO. An initial public Offering is when a company floats on the stock exchange and sells shares to the public for the first time.
  • Income shares. Companies that pay a dividend to shareholders.
  • Growth shares. Companies that reinvest profits for long-term growth.
  • Capital growth. When an asset increases in value over time.
  • Rights issues. When a company makes shares available to existing shareholders at a discounted rate. Existing shareholders are not obligated to purchase shares under a rights issue and can sell the right to purchase discounted shares.
  • Settlement date. The date when the person who has made a trade purchasing shares must make a payment.
  • Sectors. A sector is a group of similar companies. For example, the resources sector is made up of mining and commodities shares.
  • Bull market. When the entire stock market is growing.
  • Bear market. When the value of the stock market is falling.
  • Day trading. A share-trading strategy where shares are purchased and sold in the same day for short-term capital gains.
  • Market capitalisation. The number of shares a company has issued multiplied by the price. This is a way of calculating the size of a publicly-listed company.

Ready to trade? Compare share trading accounts

How the stock market works

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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