Key takeaways
- Trading means buying and selling an asset — shares, ETFs, crypto and more — to try to profit from price moves, usually over days, weeks or months.
- Trading and investing use the same markets but differ in time horizon: trading is about price moves, investing is about long-term growth and income.
- You never trade directly on an exchange — your order always goes through a broker or an exchange platform.
- Costs (brokerage, the bid-ask spread, currency conversion, financing) decide whether frequent trading can work at all.
- Leveraged products such as CFDs can lose more than you deposit. Trading isn't a shortcut to income.
At a glance: Trading is buying and selling financial assets — such as shares, ETFs or crypto — to try to profit from price changes, usually over days, weeks or months. You trade through a licensed broker or a registered exchange, and you can lose money.
What is trading?
Trading means buying an asset in the hope of selling it for more, or, less commonly, selling first and buying back lower. The asset could be a share, an ETF, a cryptocurrency, a currency pair or a commodity. What links them is the goal: profit from price movement, rather than from owning something for years.
A simple example (illustrative only): you buy 100 shares at $10.00, paying $1,000. The price rises to $10.80 and you sell for $1,080 — an $80 gross gain. With $10 brokerage each way, you keep $60. If the price had dropped to $9.20 instead, you'd be down $80, plus $20 in brokerage: $100 in total.
Trading vs investing: what's the real difference?
Trading and investing happen in the same markets, but they're driven by different goals and time horizons.
| Trading | Investing | |
|---|---|---|
| Main goal | Profit from price moves | Long-term growth and income (e.g. dividends) |
| Typical holding period | Hours to months | Years to decades |
| How often you buy and sell | Frequently | Occasionally |
| Time commitment | Regular monitoring | Low |
| Cost impact | Higher (fees and spread on every trade) | Lower |
| Impact of short-term swings | Large | Smaller over long periods |
It matters for tax, too. The ATO decides whether you're treated as a share investor or as carrying on a business of share trading by looking at your intention, how often you trade, and how business-like your activity is. Most beginners who buy to hold are treated as investors, and capital gains tax rules apply — but the ATO makes that call on the facts of your situation, so check its guidance or a registered tax agent if you're unsure which applies to you.
How does a trade actually work?
Whichever asset you're trading, the mechanics follow a similar path: you place an order, your broker routes it, the exchange matches a buyer and a seller, the trade is confirmed, and it settles.
Bid, ask and spread. The bid is the highest price a buyer will pay right now. The ask is the lowest price a seller will accept. The gap between them is the spread — a cost you pay every time you trade, even before brokerage.
Order types. A market order buys or sells straight away at the best available price, but the price can move before you're filled. A limit order only trades at your price or better, though it may never fill. A stop-loss order triggers a sale if the price falls to your level, but in a fast-moving market it can fill below your stop price.
Settlement. ASX share trades currently settle two business days after the trade (T+2); ASX has been consulting the industry on a possible future move to T+1, but T+2 remains the standard at the time of writing. Crypto exchanges typically match and settle within their own platform rather than on a fixed settlement cycle.
What can you trade?
| Product | What it is | When you can trade | On Trading Guide |
|---|---|---|---|
| Shares (ASX, US) | A slice of ownership in a company | ASX: 10am–4pm Sydney time on business days | Yes — see share trading |
| ETFs | A basket of assets in a single unit | Same as shares | Covered in our share trading guides |
| Crypto assets | Digital assets traded on exchanges | 24/7 | Yes — see crypto exchanges |
| Forex | Currency pairs | Roughly 24 hours on weekdays | Not covered yet |
| Commodities | Gold, oil and others, via ETFs, futures or CFDs | Varies | Not covered yet |
| CFDs and other derivatives | Contracts that track a price, often leveraged | Varies | Not covered — see Moneysmart's warnings |
CFDs and other leveraged derivatives carry the highest beginner risk of everything in this table — you can lose more than your original deposit. We don't cover them as a product to trade on this site.
The main styles of trading
- Day trading — buying and selling within the same day. Many trades, high costs, high stress.
- Swing trading — holding for days to weeks to catch a bigger move.
- Position trading — holding for weeks to months, trading less often.
- Long-term investing (for comparison) — buying and holding for years.
One honest line: shorter timeframes mean more trades, more costs, and more decisions made under pressure.
What trading costs
| Cost | What it is | Where it applies |
|---|---|---|
| Brokerage | Fee per trade (flat or a percentage) | Shares, ETFs |
| Bid-ask spread | The gap between buy and sell price | Everything |
| Trading / maker-taker fee | Percentage taken per trade | Crypto exchanges |
| Currency conversion | Fee when trading in foreign currency | US shares, forex |
| Financing / overnight fees | Interest on leveraged positions | CFDs, margin |
| Withdrawal and network fees | Charged when moving money or coins out | Crypto |
The risks, and how people get caught out
- Market risk — prices fall as well as rise.
- Leverage risk — borrowed money magnifies losses. ASIC has limited the maximum leverage retail clients can be offered on CFDs (from 30:1 down to 2:1 depending on the asset) because of how much money retail clients were losing.
- Cost drag — small, frequent trades can lose money to fees even when the price moves in your favour.
- Emotional trading — chasing a rising price out of fear of missing out, or trying to win back a loss quickly.
- Scams — "guaranteed" returns, unlicensed trading "coaches", unlicensed brokers, and pressure to deposit quickly. Check a broker's licence on ASIC's professional registers and read Moneysmart's investment warnings before you deposit anywhere.
Is trading right for you? Where to go next
Trading isn't right or wrong — it's a different activity to investing, with different costs, time commitment and risk. If you're still working out whether you're ready to place your first trade, our 10-point readiness checklist covers the money, knowledge, setup and discipline to sort out first.
From there, your next step depends on which market you're heading toward — share trading or crypto — both covered below.
Frequently asked questions
What is trading in simple terms?
Trading is buying an asset — such as a share, ETF or cryptocurrency — in the hope of selling it for more, usually within days, weeks or months, rather than holding it for years.
Is trading the same as investing?
No. They use the same markets, but trading focuses on shorter-term price moves and usually involves more frequent buying and selling, while investing focuses on long-term growth and income such as dividends.
Is trading legal in Australia?
Yes, for individuals. Brokers that offer share trading need an Australian financial services (AFS) licence, and cryptocurrency exchanges operating in Australia need to be registered with AUSTRAC.
Is trading gambling?
Trading and gambling are different in method — trading is based on analysing real assets and markets — but overtrading and using leverage can produce gambling-like outcomes, and neither offers a guaranteed return.
Can you make a living from trading?
Some people do, but most don't. Costs, tax and consistency all matter, and most retail traders who use leveraged products lose money. Treat any claim of guaranteed trading income as a red flag.
Do I pay tax on trading profits?
It depends on whether the ATO views your activity as investing or as carrying on a business of trading — the two are taxed differently. See the ATO's guidance on share investing versus share trading, or speak with a registered tax agent about your situation.
Sources
Related guides
What You Need to Start Trading: 10-Point Checklist
Money, knowledge, setup and discipline — what to sort out before your first trade.
Share Trading for Beginners
How the share market works, what it costs, and how to place your first trade.
How to Start Investing in Crypto for Beginners
Understanding the asset class, sizing your risk, and researching before you buy.