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Trading and Trading Costs for Different Trades

Doing trades is exciting; keeping an eye on the brokerage costs is boring. This is, however, a necessity and those who mind it will reap more profit. So, what is the brokerage costs and where must we mind it?

Use the right broker

The first thing to look for is the type of brokerage firm you choose. There are mainly two kinds of brokers – the regular full-service broker and the discount broker. For those who do trading regularly and deal with massive amounts the brokerage fee will be huge. This is true for the regular brokers who charge you 0.05% for intraday trades and 0.5% for delivery.

The market brokerage calculator India has set values that change slightly daily. And yet the broker will offer you rates that will range from 0.05% to 0.01% for intraday trades. The buying and selling of shares can prove very tricky because of the cost involved. When you choose a broker and set the rates, make sure that these rates are applied for the trade. And what is more, you must keep checking it at regular intervals to see that the original rates are in place.

You need to deposit an amount in your account to begin to do trades. The broker will charge you one amount called the Annual Maintenance Charges. If these are charged monthly, it will deplete your account and so you must check it out. The better option is to pay a lumpsum amount that prevents any monthly charges. You can get a lifetime account by making a one-time payment of Rs 500 – Rs 1000.

Two kinds of trade

The kind of trade you normally do involve is called intraday trading. This means you buy stock at the beginning of the day and sell it before the trading session is over. The trade could make a profit or loss for you. Compared to delivery, the brokerage for intraday trading is low. In Delivery, you do not finish the trade within the trading day. You hold your position for the next day. There are people who hold position for 10 years or more.

Calculate the trading cost

The net trading costs will be what you must pay other than the cost of buying the stock. This will be the brokerage, Securities Transaction Tax (STT), Stamp Duty, and other charges. You can use the brokerage calculatorgiven on the website of the service provider to find out what these charges will be. The brokerage is percentage you agreed on and is calculated on the total number of shares bought and sold.

So, if you agreed on 0.25% for intraday and 0.30% for delivery, then the brokerage figure will amount to:

  • Brokerage for the intraday: Market share price of the stock x number of shares x 0.25%
  • Brokerage for the Delivery: Market share price of the stock x number of shares x 0.30%

The Securities Transaction Tax is imposed on the total turnover as the Number of shares multiplied by the Price. The transaction charges change slightly for each exchange. Thus, the transaction charge for the BSE will vary slightly from that of the NSE. The stamp duty for each type of transaction varies and is usually taken in multiples of Rs 5000.

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