How to sell fractional shares for the best deal? A complete guide to fractional trading every small investor must know

Want to invest in stocks with a small amount of capital but unsure how to sell fractional shares profitably? Many new investors face this issue today. Whether you’re looking to clear out your scattered stocks or just starting to trade fractional shares, understanding the practical skills of buying and selling fractional stocks is an essential lesson on your investment journey.

What Are Fractional Shares? Why Is Trading Small Lots Becoming a New Investment Trend

Fractional shares (also called scattered shares) refer to stocks less than 1,000 shares. Generally, in Taiwan, the standard trading unit is “1 lot,” which equals 1,000 shares. However, investors sometimes hold or trade less than 1,000 shares, which are called fractional or scattered shares.

How do fractional shares usually occur? There are several main reasons. First, when you place buy or sell orders, if your order isn’t fully executed (for example, the set price doesn’t meet the target), you end up with a fractional position. Second, companies sometimes distribute shares or dividends that result in fractional shares. Another common scenario is investors using small, regular investments through the fractional market.

Why is trading fractional shares becoming more popular? In recent years, with increased market demand, the fractional trading market has become more active. Especially since late 2020, the Taiwan Stock Exchange has expanded trading hours and methods for fractional shares, allowing small investors to trade more flexibly without needing to buy a full lot (1,000 shares) to start.

How to Sell Fractional Shares? Mastering Trading Hours Is Key

To successfully sell fractional shares, you first need to understand the trading schedule. Fractional trading is divided into intraday trading and after-hours trading, which have clear differences:

Features of Intraday Trading: If you want to sell fractional shares during the day, you must use your broker’s trading app to place an electronic order. Phone orders are not accepted during this period. The exchange conducts the first match at 9:10, then every minute via call auction. The advantage is more trading opportunities, but if your order isn’t filled during the day, it won’t automatically carry over to after-hours; you’ll need to re-enter the order.

Features of After-hours Trading: Starting from 1:40 PM, you can place orders via electronic means or call your broker manually. The exchange conducts a single call auction at 2:30 PM, and after that, the trading session ends. If your order isn’t filled, it will be automatically canceled and won’t carry over to the next day.

Difference Between Intraday and After-hours Selling of Fractional Shares

If you hold popular stocks (like TSMC), intraday trading is a good choice because of high liquidity—there are frequent matches every minute, making it easier to sell quickly.

However, if you’re selling less popular stocks, small or mid-cap stocks, or only holding a few dozen shares, after-hours trading might be more suitable. Since after-hours trading only has one matching opportunity, the system follows the “maximum transaction volume principle,” trying to match as many buy and sell orders as possible. If you’re in a hurry to sell, consider placing a limit order at the limit down price to significantly increase the chance of execution.

Many scattered share investors face the dilemma: orders placed during the day don’t execute, but re-placing them after hours does. That’s why understanding the timing is so important.

Tips and Tricks for Selling Fractional Shares

Convert Small Lots into Whole Lots to Speed Up Execution

Suppose you hold 700 shares of Xinjin (1582.TW), but trading is slow because the stock is thinly traded. A common technique is “consolidating into whole lots.”

Here’s how: buy an additional 300 shares to reach 1,000 shares, then sell using the whole lot market. The liquidity for whole lots is much better than for fractional shares, allowing you to execute trades faster and closer to market prices. This saves time and sometimes reduces transaction costs.

Pricing Strategies for After-hours Selling

Since after-hours trading only occurs once, your pricing strategy is crucial. If you’re confident about selling, you can boldly set a limit at the limit down price. Because the system prioritizes the highest volume matches, a sell order at the limit down price is more likely to be matched. Conversely, if you want to buy quickly, you can set a limit at the limit up price.

The risk is that you might execute at an unfavorable price, but compared to waiting indefinitely, many investors find this trade-off worthwhile.

Actively Adjust Your Orders

Another characteristic of the scattered share market is liquidity volatility. Some periods have many buyers, others very few. Smart traders monitor market conditions and adjust their orders accordingly—if your order isn’t filled, consider changing the price or re-placing the order during after-hours.

How Are Transaction Fees for Fractional Shares Calculated? Comparing 5 Major Brokers

When selling fractional shares, transaction fees are an important cost factor. The fee calculation for fractional shares is the same as for whole shares—0.1425% of the transaction amount. However, brokers set minimum fees and may offer discounts for electronic orders.

For example, selling 200 shares of TSMC at a closing price of 1065 NT dollars:

200 × 1065 × 0.1425% = 303.53 NT dollars

If your broker offers a 50% discount, the fee drops to 151.77 NT dollars. While it may seem small, frequent small transactions can accumulate significant costs.

Here’s a comparison of fee policies among Taiwan’s five major brokers:

Cost Optimization Tips:

• Choose brokers with the lowest discount rate (e.g., 18%) for lower fees.
• Consolidate small lots into larger orders to reduce cumulative fees.
• Aim for a total transaction amount of at least NT$10,000 to minimize fee proportion.
• Use electronic orders to maximize discounts; avoid phone orders.

Pros and Cons of Trading Fractional Shares: Is It Right for You?

Advantages

Low Entry Barrier and Greater Flexibility

The biggest advantage of fractional trading is the low investment threshold. You don’t need to buy a full lot (1,000 shares); with NT$1,000, NT$2,000, or even less, you can start investing. This is especially friendly for small investors with limited funds. You can keep more cash for daily expenses or emergencies while participating in the stock market.

Suitable for Dollar-Cost Averaging

Many investors prefer a “dollar-cost averaging” approach—investing a fixed amount regularly each month. Fractional shares make this flexible, allowing you to adjust the number of shares bought each time based on available funds, without being restricted by whole lots.

Disadvantages

Lower Liquidity and Longer Transaction Times

Compared to active whole-lot markets, fractional markets have fewer buy and sell orders. Especially for less popular stocks, it can be hard to find matching orders. Sometimes, orders sit unfilled for hours or days, requiring price adjustments or re-placing orders.

Higher Transaction Costs

Minimum fees (often NT$20 per trade) can be significant relative to small investments. For example, if you buy only NT$1,000 worth of stock, the fee might be a large percentage of your investment, eating into returns. Some brokers may also charge additional service fees, raising overall costs.

Limited Selling Options

You can only sell fractional shares; buying requires matching a seller. If no one is selling, you can’t buy. Also, fractional orders have expiration dates; if not filled within the period, they cancel automatically. In low-volume stocks, it might be difficult to buy enough fractional shares quickly.

Long-term Investment or Short-term Trading? Find the Approach That Fits You

If your plan is long-term holding, dollar-cost averaging with fractional shares is a good choice. For short-term trading or reducing transaction costs, other tools like CFD (Contract for Difference) might be considered. CFDs are derivatives based on price movements, allowing you to trade with a smaller margin and no physical stock ownership. Many brokers offer commission-free CFD trading, only charging spreads. This is attractive for small capital and quick trades.

However, note that fractional shares are more suitable for long-term accumulation, while CFDs are better for short-term strategies. Holding CFD positions overnight incurs interest costs, adding to expenses.

Keys to Success in Fractional Share Trading

As Taiwan’s fractional trading market matures, more small investors are entering via this channel. To succeed, keep in mind:

• Understand your risk tolerance: Choose suitable products and strategies, avoiding blindly chasing hot stocks.
• Learn basic analysis: Know what you’re buying and why, rather than trading on gut feeling.
• Control transaction costs: Use brokers with favorable fees, and consolidate orders to reduce costs.
• Value timing: Choosing the right trading time—intraday vs. after-hours, popular vs. less popular stocks—can greatly improve execution.
• Maintain rational investment psychology: While the barrier to entry is low, risks remain. Avoid impulsive trades to truly benefit from the stock market.