Things You Need to Know About Pay Only When You Profit
While trading in the share market, you must know about the different charges. These include transaction charges, commodity transaction charges, stamp duty, brokerage charges, etc. It is also vital to understand how each of these charges is calculated respectively.
To start stock trading, all you need is a Demat account and a trading account. But, you must know that you cannot trade directly in stock markets. You need a broker through whom you can trade in securities and shares. The advent of the internet has made it easier for you to use the online stockbroking platform provided by many stockbrokers.
Who is a Stockbroker?
A stockbroker is an agent, middleman, or financial intermediary who helps you trade in stock markets. The services of a broker let you trade in various financial instruments, including stocks, derivatives, and futures. Brokers in the share market are of two types:
- Full-service broker: You can expect brokerage services as well as several other features from a full-service broker. These include cutting-edge research, market reports and advisory, and customer service.
- Discount brokers: If you want reduced broking charges compared to full-service brokers, you can reach out to discount brokers. Their brokerage charges are also called fixed service fees. But they do not offer any other services.
Also Read: Why Discount Broking is popular in India?
Understanding Brokerage Fees
The brokerage fee is a flat fee, a percentage of the transaction, or a hybrid of the two. You will come across brokerage fees in different industries like financial services, real estate, delivery services, and insurance. The fee amount is as per the industry and type of broker.
For instance, if you consider the real estate industry, the brokerage fee is a standard percentage or a flat rate charged to the buyer, the seller, or both.
In the share market, you need to pay brokerage fees to facilitate trading or administer investment or other accounts.
How to Calculate Brokerage Charges?
The calculation of brokerage depends on the agreed percentage or flat rate for every trade. Many stockbrokers charge you brokerage fees for every trade. However, with Espresso’s Pay Only When You Profit plan, you pay a flat rate of ₹20 for every order in intraday trading (equity, commodity, currency, F&O) that returns a trading profit online. There is no brokerage on trades that result in a loss.
Let us understand the Pay Only When You Profit feature with the help of an example.
Ayush trades daily. On a particular trading day, he makes around 10 trades. In an entire year, he makes 2500 trades (250 X 10). He uses Espresso as his discount stockbroking platform.
At ₹20 per trade, Ayush has to pay ₹50,000 (2500 X 20) as brokerage charges. However, with the Pay Only When You Profit, he does not have to pay even a penny on the loss-making trades. If 20% of his trade decisions didn’t result in a profit in trading, he doesn’t have to pay brokerage worth ₹20,000.
Before levying brokerage charges, the stockbroker decides if the trade was profitable or not. For this purpose, the average buy/sell market price of the open position for multiple buy/sell orders of the same stock/contract is considered at the time of square-off.
Things to Remember About Pay Only When You Profit
- For every segment, every exchange, and every product, the calculations are performed separately. The product types available are exchange margin funding, margin intraday square off plus, carry forward, and cash & carry.
- When you trade in a MIS+ product, you place the first leg order and the compulsory stop-loss trigger order, the second leg. Next, you can place an optional book profit trigger order, the third leg. The first leg order is tagged with the second/third leg. The stockbroker then calculates the profit and loss on the basis of such tagging and computes it based on the pair of trades executed through the product.
- The weighted average of the trade execution rate is used for calculation. The net rate after statutory levy and transaction charges is not used.
- All trades are subject to transaction charges, securities/commodities transaction charges, stamp duty, as well as additional regulatory/statutory charges.
- In the case of intraday square-off orders, you do not have to pay brokerage on the second leg if the result of the trade is a loss. But brokerage is charged on the first leg of all cases.
- Under Pay Only When You Profit, if the Buy and Sell of a particular security are not executed on the same exchange, it is not regarded as intraday trade for calculating profit/loss for charging of tariff. The brokerage will be charged as if every leg was a Delivery trade.
- The calculation of profit and loss is based on a weighted average market rate without considering related costs at the trade level, analyzed on the earliest trade time of execution.
The brokerage fees charged by different brokers vary. You can compare different brokers, their provided services, and their fees to make a choice. However, it is best to associate with a broker who charges you only for trades that help you earn a profit in shares. When you Pay Only When You Profit, you save more and earn more in the long run.
Share Market Knowledge Centre
- Demat account
- Share market
- Trading account
- Online share trading
- Intraday trading
- Futures trading
- Commodities trading
- Currency trading
How can I Trade with Zero Brokerage?
When you decide to start trading in shares, there are a few accounts that need to be opened. First, you need a Demat account where the securities will be stored. Next, you need a trading account online with a stockbroker registered with the exchange where you want to trade. And finally, you need a banking account linked to your Demat and Trading accounts.
What is Trading on Equity?
Trading on equity, also called financial leverage, is a process through which a company incurs new debt in bonds, loans, preferred shares, or debentures to acquire additional income. On this, it can earn greater returns than the interest created by the debt.
How to Transfer Funds into Your Trading Account
Investing in stock markets is one of the most lucrative ways to make quick money. You can sell/purchase the stocks of more than 7500 companies listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Frequently Asked Questions
It depends on your financial goals. If you are a newbie, you should deposit a smaller amount of money into your trading account. But as you gain experience, you can increase the amount to earn a profit in trading and make it worth your time. Additionally, how much money you should use for trading depends on your risk appetite.
No. There’s a difference between trading and gambling. A trader decides the differentiation. If you want, you can regard the financial markets as a game of chance, gambling away your money. On the contrary, you can approach trading with a specific methodology and plan.
On Espresso, you are charged a flat ₹20 per order for intraday trades across all segments - equity, currency, commodity, and F&O.
Brokerage charges include the fee levied by a broker to execute transactions or provide specialized services. These include services like sales, purchases, negotiations, consultations, and delivery.
A trading account holder making trades in the share market needs to pay brokerage charges.