Zero Brokerage: What Does it Mean?
We tend to enjoy a good discount – it’s simply our nature. And when this discount is offered for trading online, then we like the opportunity even more. Usually, when trading online, brokers levy a brokerage charge behind every trade.
Typically, this brokerage amount – applicable on all financial commodities but options – is a certain percentage of turnover on trade. For options, the brokerage is charged per lot. However, with the zero brokerage scheme, no brokerage is charged regardless of the trade you execute.
Let us understand zero brokerage meaning in greater detail.
Zero Brokerage Meaning
Zero brokerage trading was initiated to benefit and encourage the rising numbers of stock market traders in India. To put it simply, zero brokerage meaning is that when an investor makes a trade in the stock market, no brokerage is levied on the trade. It is important to completely understand zero brokerage meaning and the advantages of trading with zero brokerage. This is because brokers often claim to offer zero brokerage trading and yet go on to either charge on a per-trade basis or ask investors to pay a monthly or yearly rate which dilutes the zero brokerage meaning.
Illustrating the Zero Brokerage Meaning with an Example
Owing to the popularity of zero brokerage trading, several brokers are now offering the services of a zero brokerage account to cater to public demand. Here is an example to better help you understand zero brokerage meaning.
Let us first understand what trading online with brokerage look like:
Assuming that a broker charges 1 paisa on intraday equity trading and 10 paise on delivery trading, consider the following scenarios:
- An investor purchases 1000 TCS equity shares at ₹950
- The purchased shares are sold on the same day at ₹960
The brokerage charged for trading online in the above scenario would be: -
(1000 x 950) x (0.01%) + (1000 x 960) x (0.01%) = 95 + 96 = 191
Meaning, the brokerage charged for trading online in the above scenario would be ₹191
Let us now examine the same situation with a flat rate charged on a per-trade basis with a zero brokerage model:
Assuming that the broker charges a flat fee of ₹15 on every trade and the same trades as mentioned above were placed, then your total charges for trading online would only come up to ₹30.
There are also some monthly brokerage plans wherein an investor pays a pre-decided amount every month regardless of the number of trades he executes. The benefit of this kind of account for trading online is that you need not worry about the turnover or the number of orders executed each month.
Advantages of Trading with Zero Brokerage
Zero brokerage trading comes with some unequalled benefits to excite investors and encourage them to trade and invest in the capital market. Following are some advantages of a zero brokerage account:
- With a zero brokerage account, investors need not worry about the volume of their trade. This is especially beneficial for intraday traders.
- As the break-even point for a zero brokerage trading account is lower, the chances of profitable trades are higher.
- Trading with zero brokerage helps save money.
- Zero brokerage trading also eliminates the worry of the size of your trade.
While the zero brokerage account comes with a host of advantages for investors, they must read the conditions associated with it so that they aren’t taken advantage of. Several brokers mask their costs and simply package their services as zero brokerage trading.
Therefore, to prevent unpleasant surprises in the future, check with your broker about the charges upfront. This way, if you are not convinced, you can look for a different broker for trading with zero brokerage.
Share Market Knowledge Centre
- Demat account
- Share market
- Trading account
- Online share trading
- Intraday trading
- Futures trading
- Commodities trading
- Currency trading
Zero Brokerage Online Trading Account in India
Before one starts to invest in the capital market with their trading account, it is important to know the basics of trading online. While the internet is a great place to start expanding on your knowledge about investments, it is recommended to find a reliable investment specialist who will guide you along the way. This is because unless an investor is committed and disciplined, they can incur heavy losses in the stock market.
Lowest Brokerage Charges for Online Trading in India
To invest in the capital market, you will need to open a trading account in India. However, before you open a trading account, you must think of the charges involved in trading online. To encourage investments in the stock market, several providers offer a zero brokerage trading account wherein the investor does not have to pay any brokerage for trading online.
Mistakes To Avoid while Trading to Reduce Loss-Making Trades
When you talk about investing in the stock markets, risks are the first things that come to mind. And, it’s true. Stock markets are high-risk zones since the stock prices can change within seconds based on any social, political, or macroeconomic event....Read More
Frequently Asked Questions
Some benefits of a zero brokerage account are: -
- You save money on brokerage charges against every trade
- You increase the probability of higher profits as the break-even point is lower for a zero brokerage account
- You need not worry about the size or volume of your trade
A discount broker is a stockbroker who enables trading online at discounted rates or a reduced commission. However, with a discount broker, an investor cannot get the benefits that are offered with a full-service account, such as market research or investment advice.
With the advent of the internet, investors can now look for the right discount broker from the comfort of their homes simply by searching online. Here are some suggestions for finding a suitable discount broker:
- Examine your trading style and identify your financial requirements and goals
- Check the ratings of top brokers and verify their profiles
- Look for low brokerage costs which will benefit you in future trades