In a country like India most of the brokers go on to charge commissions on trade. The concept of brokerage is applied for all products outside of the options. This is arrived at a percentage on the total value of trade you conduct. When in options it is calculated on the basis of a flat brokerage per lot. An example would be Rs 100 per lot. Zero brokerage trading in India has emerged in the last few years at a considerable level. But in order to figure out what it is let us illustrate it with the aid of certain examples.
Let us take an example to throw more clarity about zero brokerage.
There is a broker who goes on to offer a commission of 1 paisa on intraday trading(MIS) or equity trading. On delivery trading they are offering 10 paisa brokerage. Now imagine a situation where you place both the trades.
- Firstly, you are going to purchase 1000 shares of Reliance equity at Rs 960
- Then you would be able to sell the same 1000 shares of Reliance equity at Rs 970 during the day
Then the brokerage rates applicable would be
1000* 960 *0.01% + 1000* 970 *0.01 % = 96 and 97 a total of 193 that is the brokerage applicable in such cases.
Now explaining a trade without any brokerage
Now let us take the same example with the aid of a flat pay per trade that is the zero brokerage model. Now assuming your broker charges a commission a flat rate of Rs 20 per trade. Now the above mentioned both trades were placed as your fees would be merely Rs 40.
The benefits of zero brokerage are immense
- When you are operating on a zero brokerage model you do not have to worry about the size of your trade
- During the phase of zero brokerage model, the breakeven point is a lot lower. This does increase the chance of your trade being profitable. Gone are the days where you had to worry on how large or small your trade size is.
This is the really essence of zero brokerage. No need to hesitate and ask your broker on how much you are coughing up in terms of brokerage. The reason being you might want to switch over to a broker who could be charging low brokerage.
Trading and investment opportunities in India
If you are planning to invest in stock markets, you need to make profits and stay away from losses. Once you have gone on to complete the basic formalities then opt for a zero brokerage plan. This has to be the case in case of equity or commodity market. The reason being brokerage has an important role to play as far as profitability evolves. Now have you stumbled upon any zero brokerage plans. Based on your preferences or budget people tend to opt for a trading plan. Most of the brokers levy hidden fees making concept of zero brokerage a mere gimmick.