When a trader trades in shares, there are a lot of fees linked with the process of trading. These may include such fees as Security Transaction Tax, stamp duty, brokerage charges and more. It's important for traders to know about all these and how they’re reflected in amounts charged for trades made. It's easy to compute all these with a brokerage calculator.
You could say that brokers are agents who help traders to buy and sell stocks and shares. They may also aid investors in purchasing investments such as futures and options, and other financial assets. Brokers charge fees for all the services offered by them. This is known as a brokerage. Primarily, two kinds of brokers exist and fees are charged according to the type of broker investors opt to get the services from.
Services of brokerage are offered to investors by the following types of brokers who charge brokerage charges:
Discount Brokers - Offering investors an extremely efficient platform to execute trades, discount brokers don’t give investors any tips or advice. They, instead, charge investors a fixed rate for each trade made. For instance, this may be a flat rate of Rs. 10 or Rs. 20 in the event of delivery trading or intraday trading. Moreover, some of these may not even levy a charge for services of delivery trading.
Brokers Offering Full Services - Brokers that offer investors full services are conventional brokers. Their trading charges are more than those of discount brokers as they offer investors a gamut of services, including advice and suggestions, management of assets, etc. They will most probably charge investors anywhere from 0.01% - 0.50% on delivery and intraday trading.
Although it's simple to calculate fees and charges through an online brokerage calculator, you may want to know the break-up of components and how charges are basically levied. This is best explained through a simple example:
Say a broker charges fees of 0.05% for intraday trading, this essentially translates to brokerage fees on the full turnover. If the security you buy has the value of Rs. 100, the brokerage charges will be 0.05%, which equals Rs. 0.05. The full brokerage charge on the total trading is Rs. 0.05 plus 0.05 = Rs. 0.10 (for selling and buying). Furthermore, the brokerage gets computed on the total price of the stocks based on the percent determined. So the formula to calculate brokerage is the following:
Assuming that the fees for intraday trading is .05%, and for delivery is .50%, then -
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