Guide to Fractional Share Trading: How to Successfully Sell Off from Time Zones to Commission

When I first started trading fractional shares (less than a unit stock), I was really confused. I wondered, "How can I trade efficiently?" I struggled with the timing, especially when it came to selling. But now, I’m completely hooked on the charm of fractional shares.

What is a fractional share?

A fractional share refers to a stock that is less than 1,000 shares (1 unit). The minimum trading unit is 1 share.

There are various reasons why fractional shares come into existence. For example, it could be that not all orders are executed, or that stock price fluctuations are too rapid to reach the order price, or it may occur during the dividend process of the stock. Personally, I have wanted to buy high-priced stocks but lacked the funds, so I collected fractional shares little by little.

Trading Hours and Rules for Odd Lots

Since October 26, 2020, trading of fractional shares has been possible even during regular trading hours. The specific trading hours and rules are as follows:

In-market trading:

• Time: 9:00-13:30
• Order method: electronic orders only
• Trading method: First transaction at 9:10, followed by collective competitive bidding every minute.
• Order of execution: price priority, if the price is the same, then time of order priority

Aftermarket Trading:

• Time: 13:40-14:30
• Order method: either electronic or telephone manual ordering
• Auction method: Collectively competitive bidding only once at 14:30
• Order of execution: price priority, if the prices are the same, the order is determined randomly by the computer.

Orders that were not executed during the trading session will not automatically carry over to after-hours trading. You will need to reorder during after-hours. I initially didn't know this and lost out.

How to Buy Fractional Shares: Account Opening and Fees

Trading in fractional shares is done through a brokerage app just like regular stocks. You just need to switch to "fractional share trading" mode on the trading screen.

The fee is calculated in the same way as regular stocks, at 0.1425% of the transaction amount. However, brokerage firms may have minimum fees for odd lots and discounts for electronic orders.

For example, if you buy 200 shares of TSMC (2330.TW): 200 × 1065 (latest closing price of TSMC) × 0.1425% = 303.53 Yuan

If the brokerage firm offers a 50% discount: 303.53 × 50% = 151.77 yuan

Comparing the fees of each brokerage firm:

|Securities Company|Account Opening Requirements|Minimum Commission for Fractional Share Trading|Electronic Order Discount| |---|---|---|---| |Fubon Securities|Identification documents and bank account|1 yuan|18%| |E-SUN Financial Holding Co.|Identification documents and bank account|1 Yuan|20%| |Gate.io Securities|Identification documents and bank account, fund proof|1 yuan|60%| |Shinko Securities|Identification documents and bank account|1 Yuan|10%| |Unified Securities|Identification Documents and Bank Account|1 Yuan|1.68 Discount|

Techniques for Selling Fractional Shares

Exchanges make fractional trading convenient, but less popular stocks may have low trading volumes, and orders may not be filled immediately.

From Zero to Order For example, if you want to sell 700 shares of Shinkins (1582.TW), this stock is not popular, so there is a possibility that it may not be executed on the same day. In such cases, you can use the "Zero to Seiri" method.

First, I will buy an additional 300 shares to make it 1,000 shares (1 unit), and then sell them in a more active stock market. This will make it easier to sell.

Buy at the stop-high price and sell at the stop-low price In after-hours trading, transactions occur only once at 14:30, so if you want to ensure a purchase, it is advisable to place an order at the stop-high price. This maximizes the possibility of buying according to the principle of maximum execution. Similarly, if you want to sell quickly, you can increase your chances of selling by offering at the stop-low price.

This is an extreme method, but it can be used in urgent situations. I have also used it once when I needed important funds.

Advantages and Disadvantages of Odd Lots

Advantages:

• Low barrier to entry for funding (small investments possible)
• Convenient for "trial purchases"
• Suitable for regular fixed investment

Disadvantages:

• Low liquidity (takes time to execute orders)
• Fees tend to be relatively high
• There are restrictions on trading

Investment Methods for Small Amounts Other Than Fractional Shares

If you are concerned about the fees for fractional shares and liquidity, CFDs (Contracts for Difference) are also an option.

For example, if you buy 5 shares of Google stock: $400 × 5 = $2000 needed

But if you buy 5 units of Google CFD with a margin rate of 5%: The required funds are only 100 dollars

However, fractional shares are suitable for long-term holding, while CFDs are suitable for short-term trading. CFDs incur interest if held overnight.

Summary

Fractional trading is becoming increasingly popular among Taiwanese investors. It meets the needs of small investors and enables more convenient and faster transactions.

To succeed, it is important to understand your risk tolerance, learn basic investment analysis methods, and maintain a calm judgment.

Choosing a brokerage and comparing fees is also important. In particular, the 10% fee from Shinko Securities is attractive, but you should choose a brokerage that suits your trading style.

Anyway, trading fractional shares is quite interesting once you try it! You might be confused at first, but once you get used to it, you can enjoy the joy of investing even with a small amount.