Everyone knows that share trading is used to build wealth, but few truly understand how it works. When you trade shares, you’re buying and selling a portion of a company on a share market (or a stock exchange).
Each share has a price. The price of a share is determined by the supply and demand of a company's shares in the market and the company’s 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.
You can make money from share trading by selling shares for a higher price than you purchased them for or when a company pays dividends.
Share Trading Account Offer
IG Share Trading Offer
Standard brokerage - Australian shares
Share Trading Account Offer
Special offer: Earn up to 10,000 Qantas Points on a new IG Share Trading account. Competitive broker fees on Australian shares, international shares, forex and CFD trading.
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
Updated April 8th, 2020
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.
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.
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.
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.
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.
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 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).
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.
How likely would you be to recommend finder to a friend or colleague?
Very UnlikelyExtremely Likely
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Important information about this website
finder.com.au is one of Australia's leading comparison websites. We compare from a wide set of banks, insurers and product issuers. We value our editorial independence and follow editorial guidelines.
finder.com.au has access to track details from the product issuers listed on our sites. Although we provide information on the products offered by a wide range of issuers, we don't cover every available product or service.
Please note that the information published on our site should not be construed as personal advice and does not consider your personal needs and circumstances. While our site will provide you with factual information and general advice to help you make better decisions, it isn't a substitute for professional advice. You should consider whether the products or services featured on our site are appropriate for your needs. If you're unsure about anything, seek professional advice before you apply for any product or commit to any plan.
Products marked as 'Promoted' or 'Advertisement' are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options.
Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment when you click on those buttons or apply for a product. You can learn more about how we make money here.
When products are grouped in a table or list, the order in which they are initially sorted may be influenced by a range of factors including price, fees and discounts; commercial partnerships; product features; and brand popularity. We provide tools so you can sort and filter these lists to highlight features that matter to you.
We try to take an open and transparent approach and provide a broad-based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.
Some product issuers may provide products or offer services through multiple brands, associated companies or different labelling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.
Providing or obtaining an estimated insurance quote through us does not guarantee you can get the insurance. Acceptance by insurance companies is based on things like occupation, health and lifestyle. By providing you with the ability to apply for a credit card or loan, we are not guaranteeing that your application will be approved. Your application for credit products is subject to the Provider's terms and conditions as well as their application and lending criteria.