When first venturing in the world of stock trading in Australia, there are a lot of factors to consider. New traders need to consider the different brokers, trading platforms and strategies available. Beginners also need to learn how to manage risk to give yourself the best chance of making a profit. The good news is that there are plenty of choices available to Australians looking to start stock trading. There are risks involved with every type of investment so we recommend taking some time to educate yourself before getting started. Our detailed guide to stock trading in Australia will ensure you know exactly what you are getting into.

How to Start Stock Trading in Australia

You will hear people talking about trading stocks, shares, and equities, which can be confusing because they all mean the same thing and are used interchangeably. If you are planning on share trading, Australia has a well-set-up system, and the process is not complicated, but there are a few things you’ll need to get in place first. Australian traders usually work through a brokerage that provides an easy-to-use platform that can be accessed online or via an app.

As a new stock trader, you will need to choose a brokerage that meets your needs and learn your way around the platform so you know how to enter and exit positions (that is, buy and sell stocks). You’ll also need to understand how to use the various tools that trading platforms make available to their customers. Don’t worry; brokers try to make this as easy as possible for you. Most brokers will have education and training available, including tutorials and video demonstrations of how to use the platform.

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Many will also allow you to open a demo account to practice trading with virtual money. This would enable you to find your way around the platform, see how everything works, and even try out trading strategies to determine if you would make a profit or loss if trading with real money. While demo accounts cannot precisely imitate how a trade would go in real life, they give you a good idea and help new traders learn how a platform works.

 

Top Australian Brokers

 

If you are already trading forex or other assets with a multi-asset broker, you may find using the same broker for stock trading convenient. Some platforms, however, specialise in a particular asset, so you may find it’s better to open an account with a new broker for your stock trading activities. If you are new to investing but want to focus on stocks, you can pick a broker specialising in such trades. If you think you would like to branch out and trade other asset classes, such as forex, in the future, go for a multi-asset broker with a good stock offering that also has the other assets available that you’re interested in.

Risk Management

Risk management is perhaps the most vital skill to learn when stock trading in Australia. Risk management is everything involved in managing your money, protecting your capital, maximising profits, and minimising losses. It includes having systems for measuring the size of your potential losses against the original profit potential on each new position you take.

Risk management includes developing the discipline to trade to a predetermined strategy, generally governed by technical and fundamental analysis, rather than making emotional decisions and trading ‘on a whim’. It also covers things like setting a budget for your stock trading, never risking more than you can afford to lose, and diversifying your portfolio to minimise risk if a particular company or industry is hit by factors that cause a sudden downturn.

From a technical standpoint, this generally involves using your broker’s trading tools to set up automated order types. You can set up stop losses, which allow for a position to be automatically closed when a price goes below a certain level, or take-profit orders, which will enable a position to be closed when an asset reaches a specific price, providing you with a set level of profit that you are happy with.

Choosing an Australian Stock Trading Platform

If you’re an Australian citizen or resident interested in share trading, Australian brokers will probably serve you best. At the very least, ensure that the brokers you are considering are regulated and licensed by the Australian Securities and Investments Commission (ASIC). It is the main regulator for brokers based in Australia, and it also regulates international firms that have an Australian office or that target Australian investors.

Other things you will want to look at include commissions, trading fees and additional charges such as admin fees and inactivity fees. Depending on your needs, you might also be concerned with the platform’s built-in trading tools and indicators. Also, account types and features, the minimum deposit needed, deposit and withdrawal fees and limits, issues such as methods to deposit and withdraw cash, and how long withdrawals take to process. If you’re a beginner, you may also want to ensure you can access education, training, and a risk-free demo account.

Each investor will have different requirements, so think about the aspects of the broker that will impact you. Consider the type of trading you want to do, your experience level, your capital, and your objectives. Then do your research and compare brokers, looking specifically at the features that matter to you. To help you in your research, look at our broker reviews and list of the best stock brokers available to Australian investors.

Strategies for Stock Trading in Australia

There are various stock trading strategies that you may want to try. Here are some things you need to consider when planning your strategy.

What kinds of stocks will you buy?

You may want to invest in growth stocks or value stocks. Growth stocks are those that analysts consider will outperform the market in general or their specific market segment for some time. Value stocks are generally defined as those deemed to be currently undervalued. They are therefore expected to gain value over time as the market corrects their prices to their true value. You may also want to consider how ethical and sustainable the companies you invest in are and whether they pay regular dividends. You’ll also want to diversify your portfolio so you don’t have too much invested in any one stock or sector.

How much will you invest?

You will need to think carefully about the amount of capital you have and how you want to invest it. It is a good idea to trade the market with money you will not need in the short term, as this means even if you lose some money, you will have time to recoup it. When trading regularly, many experts advise not to use more than 1-2% of your capital on a single trade to manage risk and minimise losses. Australian forex traders often use broker leverage in the form of CFDs, and this is sometimes possible when trading stocks too, but the level of leverage offered will be much lower. Make sure you fully understand how leverage works if you are considering using it, as it can lead to more significant losses as well as potentially bigger profits.

When will you enter and exit trades?

Deciding when to enter and exit trades is the core of your investing strategy, and you will want to have a solid plan in place. You must decide which indicators to use to help you make trading decisions. Many investors rely on a combination of different technical indicators, such as Relative Strength Index (RSI) or Exponential Moving Average (EMA) tools. Savvy investors also apply fundamental analysis of the market and the sectors they invest into their overall strategy. Your market analysis will inform your specific trading tactics and determine where you place your stop-loss and take-profit levels.

In short, if you want to start stock trading in Australia, there are many things to consider. Start by finding a broker that meets your needs. Then educate yourself and try out a demo account. Learn how to use technical indicators, and ensure you understand the basics of technical and fundamental analysis. This will enable you to devise solid trading strategies based on specific metrics. Lastly, make sure you always practice good risk management to preserve your capital and minimise any losses.

Stock Trading in Australia FAQs

How to Buy Stocks and Shares in Australia

To buy stocks and shares in Australia you will need to open an account with a regulated broker, though it is also possible to buy stocks and shares directly through IPOs, crowd funding and employee share schemes. You will then need to do some research into which companies you would like to invest in. You should also have a risk management plan in place to ensure you don’t risk more than you can afford to lose.

What Are Stocks and Shares?

Stocks and shares are a type of asset that represents ownership of a company or similar entity. When you buy shares you are buying a part of that particular company. As the company’s fortunes change the value of the shares will change accordingly, hopefully increasing in value over the long term as the company becomes more profitable. There are no guarantees that stocks and shares will increase in value however – prices can go down as well as up.

How Much Tax Do You Pay on Stocks and Shares?

Any profits made from selling stocks and shares in Australia are liable for capital gains tax (CGT). When you sell stocks and shares for more than you paid for them, a capital gain, you will have to pay capital gains tax on the resulting profit. If you sell them at a loss, a capital loss, this will offset any other capital gains tax and reduce the total amount of tax you need to pay.

What Are Blue-Chip Stocks?

Blue-chip stocks are shares in large, well known companies with excellent reputations and long, financially sound track records. Blue-chip companies usually have market capitalizations in the billions of dollars and are the market leaders in their sector. Blue-chip stocks are considered safe investments due to the long history of financial stability these companies have. However profits are never guaranteed and stock prices can go down as well as up.

Can I Buy Shares When the Market is Closed?

In Australia brokers are not allowed to enter orders into the ASX system when the market is closed. The Australian stock market is open from 10am until 4pm Sydney time Monday to Friday. There are set 3 hour periods before and after normal trading hours known as the pre-open and adjust periods. During the pre-open period brokers are able to enter new orders into the system in preparation for the market open. During the adjust phase brokers are able to cancel and adjust existing orders. For some international markets it is possible to buy and sell shares out of hours through ECN networks.