Zero Brokerage Unlimited Trading
Over the last two decades, there has been a steady rise in the number of people opting for stock trading as means to boosting their income and generating wealth. The stock market is a high-risk arena but offers multiple earning opportunities for people willing to spend time researching and analyzing the markets.
As a stock trader, apart from assessing the direction of the movement of the market, you also need to factor in various fees and charges associated with trading to be profitable. One such charge is brokerage.
Since SEBI has mandated all trades in the market to be entered through a registered stockbroker, every trader needs to open a trading account with a stockbroker to be able to trade. Stockbrokers charge brokerage to extend their services.
In recent years, there have been many changes in the way brokers charge brokerage. In this article, we will discuss zero brokerage unlimited trading and also introduce you to the latest evolution in brokerage plans – a zero brokerage on loss-making trade plan.
Zero Brokerage on Unlimited Trading
Traditionally, stockbrokers offered a basket of services along with the trading account like investment advisory, access to research reports, etc. Hence, they charged a sizeable brokerage to cover the costs associated with them. As the markets started getting more competitive and traders started finding it difficult to earn profits, discount broking evolved where stockbrokers started offering only trading services, sans the added features and charged lower brokerage.
Also Read: How Low Brokerage Charges are Calculated?
However, the brokerage was usually a small percentage of the value of the trade. Hence, high-priced stocks were avoided by day traders as the net brokerage amount would raise the breakeven point. This resulted in the launch of flat-fee brokerage plans where the broker charged a flat amount as brokerage regardless of the size of the trade.
However, these plans were not well-suited to traders who place multiple trades in a day and were highly active. Hence, stockbrokers started offering zero brokerage on unlimited trading plans. In these plans, the broker charges a fixed amount every month and allows traders to enter as many trades as they want in the month.
You can think of this as opting for a buffet instead of an a-la-carte meal at a restaurant. While a-la-carte is suited to people wanting to have a small meal or a specific dish, a buffet is a better option for an unlimited meal. Similarly, if you are a light trader and want to trade maybe once in a day or two, then a regular trading plan is good for you. On the other hand, if you are an active trader and want to enter multiple trades, then the zero brokerage on unlimited trading plan should be an obvious choice.
Most stockbrokers offer a brokerage calculator on their websites to help traders find the total charges they will have to pay per trade. These calculators include other regulatory and statutory charges like STT, Stamp Duty, SEBI charges, transaction charges, GST, etc. Before you place a trade, it is important to assess the total costs associated with it to calculate the right breakeven point for your trades. You also need to factor in charges associated with the Demat account to get a fair picture.
Also Read: Understanding the Different Demat Account Charges
Before opening a trading account online, make sure that you go through the list of charges and ensure that there are no hidden costs involved. Zero brokerage on trading can be a great benefit to active traders who can reduce their outgoing brokerage and increase their chances of registering profits.
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Frequently Asked Questions
If you are an active investor and place multiple trades in a day, then the total brokerage would add up to a substantial amount. In the stock market, losses are inherent. Hence, when you are squaring off a loss-making trade, paying brokerage can only add to your losses. A zero brokerage on loss-making trade plan ensures that when your intraday trade suffers a loss, you don’t have to pay additional brokerage. This can help lower the breakeven point and increase your chances of booking profits.
When you are looking for zero brokerage on trading plans, you need to primarily assess your trading pattern so that you can choose the perfect one for you. There are many plans available that allow you to reduce brokerage liability and earn profits.
In a zero brokerage on loss-making trade plan, the broker does not charge brokerage on square-off trades where you are not making a profit. So, if you purchase a share at Rs.100 but square it off at Rs.95 and book a loss, the broker will not charge brokerage for the square-off trade.