With the rise in the number of users involved in the online trading scene, one has to be competent enough to keep the profits at a decent level. In order to ensure the best possible outcome, there are a few tricks and concepts which are recommended for all traders, professional or novice.
One such thing is the concept of zero brokerage trading. Here is all you need to know about zero brokerage trading and how it can benefit your trading endeavours.
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What is zero brokerage?
In most cases, the brokers or the middlemen involved in the trading process charge an exclusive fee for every trade or transaction. This amount is called the brokerage and is calculated as a percentage of the total turnover acquired through the process. The percentage of brokerage is usually a fixed number per lot.
Unlike this case, where the amount varies with the total trade, fixed brokerage or zero brokerage trading charges a fixed amount per trade irrespective of the turnover.
The concept of zero brokerage trading is better understood when explained with an example.
- Let us consider the basic brokerage in the scenario to be 1 paisa for intraday equity and about 10 paise for delivery trading.
- An investor purchases 220 equity shares for 240 rupees and sells the same for 250.
- Then the charges are calculated to be (220x240x(0.01%))+(220x250x(0.01%)), which is 52+55.
- This leaves the total brokerage cost at 107 bucks approximately.
The same trades, when made with a charging system following a pay-per-trade basis, which charges a flat price of 15 rupees per trade, would only cost 30 bucks in total.
As one can see, the difference between the costs when the same amount of trading is done by following the different techniques is almost over 60 rupees. This amount of savings is pretty significant, especially when one is dealing with such trading on an everyday basis for a long span of time. Here is how you can get started with your trading.
Starting a Demat account for your trades
As of common knowledge, a Demat account is one of the primary requisites required in stock marketing, irrespective of the type of trade or the process involved.
In order to get the best out of your zero brokerage trading, the best choice would be a zero balance account. This type of account is a variant of the classic account but without the hassle of a minimum balance.
Choosing your Demat account
With the current increase in the traders involved, the service providers offer a wide section of plans dedicated to supporting zero brokerage trading. A few of the common types include selective zero brokerage accounts, plan-based accounts, etc.
Many experts recommend that you opt for a plan-based account and modify your plan as per your personal needs and according to your trading process. Choosing your Demat account might involve a significant amount of time spent on research, but it is not something you can compromise on.
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The concept of zero brokerage for loss-making trades has been highly beneficial to all traders, irrespective of their size and sector. Here are a few noteworthy advantages it holds over the conventional trading methods.
- As it is clearly evident from the example which has been explained above, the amount of money one can save by switching to zero brokerage trading methods is pretty significant, in most cases even cutting down the spending by half or more.
- When you use zero brokerage trading, the size of the transaction holds no criteria, hence making it possible for smaller setups to carry on with their trading in a smooth manner and more efficiently as well.
- The volume of trading is also not a concern with zero brokerage trades. This is especially helpful for huge marketers making intraday trades, etc.
- Using these methods allows the user to increase the chances of profit because the general break-even point itself is lowered.
To wrap things up, the advantages of using a zero brokerage trading system are being applauded and critically acclaimed by successful traders in the current scene. This is also getting a lot of newbie traders into the idea of trading itself, which is why it is predicted to be one of the important drifts in the trading trends.