Stock trading platforms are software applications run by brokerage firms and financial institutions like banks. Compared to the pre-Internet era, they make it easier and more affordable to buy and sell financial assets, including stocks and securities, exchange-traded funds (ETFs), and real estate investment trusts (REITs).

Today there is a wide variety of web-based platforms and mobile applications that digitally facilitate transactions and provide information and market trends. Platforms vary in terms of their trading fees, which markets/countries they provide access to, ease of use, and features/order types offered.

Experienced investment analyst, founder of the members-only investor service Rask and host of three popular podcasts on Australian investing, Owen Rask, said stock trading platforms had democratized investing for Australians.

“Gone are the days when investors needed to take a train into town or call their stockbroker, who is paid a commission, and get advice before placing a trade,” Rask said.

“Modern platforms are using cloud-based technology to reduce cost, increase ease of use, and improve choice for both consumers and professionals.”

How do stock trading platforms work?

Company shares are publicly traded through stock exchanges around the world, making it possible for people to buy a share and benefit from increases in the company's value or earnings. But the actual buying and selling is done by authorized brokers.

Traditionally, that meant dealing with human beings who would provide guidance on which stocks to buy and make trades: like the brokers depicted in movies yelling frantically into a phone or pacing the trading floor of the New York Stock Exchange while yelling in the style of of an auction.

In online trading, the licensed brokerage firms that run the platforms do not offer advice, they simply execute the buy or sell orders that you request digitally through a few clicks within their website or app.

Not all brokers have access to all exchanges and therefore not all platforms will allow trading on the global markets. Many Australians prefer stock trading platforms that offer access to the Australian Stock Exchange (ASX) and US markets so they can buy shares in Amazon or Tesla.

Another important consideration for Australians investing in ASX-listed stocks is that there are two brokerage models, CHESS-sponsored and custodial:

• CHESS refers to the ASX backend system used to manage the settlement of stock transactions and record the details of sales (Clearing House Electronic Sub-Registration System). Trading online through a CHESS sponsored broker means that you will be issued a Holding Identification Number (HIN) which links your details directly to your ASX shares. Your unique HIN verifies that you directly own your investments made through that broker and allows for easier transfers of your holdings between brokers.
• A custody model is where the broker acts as the ‘owner' of the shares on your behalf. He gets the benefit of changes in stock price or dividends paid, but he is not the legal owner of the investment.

How do you actually set up a brokerage account on a stock trading platform? Like many online services you'll already be familiar with, the registration process typically involves:

• Selection of account types/levels available
• Provide personal data and contact information
• Verify your identity, which may include sharing identification documents
• Deposit funds into your account or link to your bank account.

Can I trade stocks in Australia without a stock trading app?

You can trade stocks in Australia without a stock trading app by hiring a full service stockbroker who will usually provide personalized advice and execute your trades. Stock trading platforms don't tell you what to invest in, but they have gained popularity because they are self-directed and usually cheaper.

Most stock trading platforms can be accessed through a web browser on your desktop or laptop computer, and/or a dedicated mobile app for trading on your phone.

Research published by Australia's financial services regulator ASIC in 2022 showed that trading platforms offered by banks were the most widely used platforms. Since linking a bank account to fund trades is often part of building a stock trading platform, it makes sense that many people would find it convenient to use bank trading platforms. It also explains why some of the most widely used platforms are from the big four banks, including CommSec and NABtrade.

Other leading non-bank stock trading platforms used in Australia, such as CMC Markets Invest, eToro, IG Share Trading and Superhero, also allow you to trade via the web and separate mobile apps.

Some smaller niche offerings are based solely on apps, including:

• CommSec Pocket – A simplified trading platform from Commonwealth Bank that only allows users to invest in ETFs. It has lower fees than its full-featured trading platform, and users can invest as little as $50.
• Douugh – Formerly known as Goodments, Douugh can only be used through an iOS or Android app, requiring a minimum of $50 to fund your account.
• Syfe – A mobile first platform with no minimum investment that entered the Australian market in 2022. It currently supports trading in US stocks and ETFs (with the promise of future expansion to include the ASX).

Are stock trading platforms safe?

Established and licensed stock trading platforms are generally safe to use, as long as you are well informed and understand the risks involved. Owen Rask advises users to verify that the platform's website displays an Australian Financial Services License (AFSL) number, issued by the Australian financial watchdog, ASIC.

“You can take this number and check that the platform is legitimate by going to asic.gov.au and looking up the AFSL number. If you are confused or concerned, talk to your financial adviser.”

Rask cautions that even if an online brokerage does everything right, humans are still fallible.

“For example, I have never met someone who hasn't made a mistake or lost some money. That is part of the long-term investment,” she said.

He recommends starting with the smallest investment you can, usually around $500, and investing in Australian stocks via an ETF.

“So if it's right for you, make a pact that you'll check it every day but not sell it for a month. It's okay to be afraid of your first investment.

“But stay with it. If you start with $500, you can always make it back on time. Remember, all the richest people in the world invest in businesses. And the stock market is just a place to invest in big business.”

In addition to standard buy/sell orders for stocks and ETFs, some platforms may also offer riskier leveraged trading options that can trip up investors. In particular, Rask argues that people should avoid platforms that offer contracts for Fifference (CFDs) at all costs.

“CFDs look like stock trading, they sound like stock trading, and they make you feel like you own something. However, CFDs are more like gambling on steroids. They destroy investment portfolios, with losses that exceed their original investments.

“Even if you are interested in their CFDs, avoid them. They are disastrous, with over 70% of people losing money and often losing more than they originally invested.”