Share Trading Accounts Australia

Share trading tips

 

10 tips for starting out in online share trading

1. - Maintain phone access. While online trading can be direct and convenient, it's often advised that investors (particularly those who are less experienced) choose a broker that also offers a phone service, as some online trading platforms can get clogged with traffic during peak trading periods.

2. - Check cash account requirements. In order to start trading, you'll need to set up a share trading account with a financial institution specified by the online broker. Before signing up with an online trader, check the broker's account opening requirements. Some involve minimum initial deposits of up to $5000, whilst others require no minimum deposit at all. You should also check to see whether you can monitor your balance in this trading account online.

3. - Frequent trader discounts. If you're a frequent trader, then many online brokers offer significant discounts which can cut transaction costs significantly. If you're not a frequent trader, then you also need to check whether advertised discount brokerage rates only apply if you complete a certain number of trades per month. Generally anything in excess of 21 trades per month will incur some kind of discount rate.

4. - How good is the research on the site's platform? Online brokers offer discount rates because they don't give you hands on advice. As such, the inexperienced trader can find him/herself adrift if the site they're using doesn't provide solid research materials and up to date market reports. Always check to see if these are available, and what charges apply to use them. More sophisticated features such as market depth and charting tools will be of greater use to the frequent trader, so again, there's no point in the less frequent trader paying for these if they're going unused.

5. - How does the site charge for services? Some sites charge a flat fee for trades up to a certain amount (e.g. $24.95 for trades up to $10,000) or a percentage of the value of the trade (e.g. 0.16% of trades up to $100,000). You should always consider the services provided when assessing which type of fee schedule to opt for.

6. - Beware off-market offers. Investors should always be wary of unsolicited offers to buy their shares, particularly when these offers are well below the shares' market value. A number of unscrupulous operators attempt to con small investors into selling them their shares at dramatically reduced prices, so they can then sell them off for huge profit. Online investors, who don't have access to a full service broker, can be susceptible to this kind of practice if they don't know the real value of their shares. Make sure you know your shares' value and keep up to date with their future prospects.

7. - Check for hidden fees. Always check to see if your online trader charges extra fees for services beyond standard ASX share trades. These include: options and margins trading, off-market offers, CHESS conversions (i.e. shares received directly from a privatisation, de-merger or share buyback) and fail fees (if you don't have enough money in your account to cover a trade, some providers will charge between $50 and $100 per day until the funds are available).

8. - International access. Many online brokerage sites don't yet provide access to international markets, and the ones that do are generally limited to the main US exchanges, e.g. NYSE and NASDAQ. For online access to Asian and European markets, you'll probably have to hunt around.

9. - Security. When it comes to transferring financial details over the net, security is paramount. Security issues have arisen with some of the major online trading providers in recent times, so you should check with ASIC, and even finance news sites, to make sure the provider you've chosen has a good security record.

10. - Practice. If you're new to online trading, the ASX website provides an online program that allows investors to practice simulated trades on the market. So before you put your own money on the table, it might be a good idea to place a few 'virtual' trades first, just to see how good your knowledge base is.

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