If you are trading shares, some fees are associated with it. It consists of the service tax, security transaction tax, brokerage charge, stamp duty, etc. The security transaction tax and brokerage charge are common among the various costs.
In exchange for services the broker provides, they charge a fee, known as brokerage. There are two types of stockbrokers, and the brokerage charges are based on the type of broker chosen by you.
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Types of stockbrokers
Based on the services provided by stockbrokers, they are two types.
1. Full-service brokers
Full-service brokers are traditional brokers, and their services consist of assisting with trading in currency, stocks, and commodities. They do the complete research for investors, manage their assets and sales, and give them expert advice.
Full-service brokers also offer the asset to investors for banking. The charge of full services brokers lies from 0.01% to 0.50% on both delivery and intraday trading.
2. Discount brokers
Discount brokers provide a highly efficient platform that is used to make the trade in commodities and stocks. The charges possessed by discount brokers are lower, but they do not give investment advice to investors. These stockbrokers charge fixed fees for delivery and intraday trading.
Understanding of brokerage charges
As investors, you need to know that you have to pay the brokerage charges during the selling and buying of the shares. In the stock market, some brokers work opposite to this statement. They only charge a one-time fee for either buying or selling.
The brokerage is calculated on the overall cost of shares at a certain percentage decided by investors. As the competition between the various brokers is rising, brokerage charges are becoming more affordable.
How is the brokerage calculated?
Here, you learn how brokerage charges are calculated and on which factors it is based.
1. Sell/buy price
The selling and buying price of shares is the important factor that highly affects the brokerage charges. It is related to brokerage fees in exact proportion.
2. Transaction volume
The transaction amount is another important factor that affects the brokerage calculations, whether it can be done through a brokerage calculator or manually. The calculation of brokerage on shares is raised with the transaction volume.
But here are some brokers in the share market who lower the percentage fees when traders place big or large volume orders.
3. Type of broker
As we tell you, two types of brokers exist in the stock market, named full services brokers and discount brokers. Both the broker types possess different brokerage fees and affect the brokerage calculations accordingly.
There are many broker firms available now for investors to do trading. The brokerage charges by brokers are a good source of income for brokers. Usually, the broker adopts the technique of providing a low brokerage to attract the traders only if they provide you with a high volume of shares.