One of the most important factors driving any purchase or sale decision is the cost involved in the process. Akin to the purchase/ sale of assets such as a car or a house, trading in securities also entails several costs. Understanding the costs associated with any trade order is pivotal to ascertaining the feasibility and profitability of the trade, and a brokerage calculator can help you accomplish this task in a streamlined manner. In this article, we shall delve into the meaning and usage of a brokerage calculator, and how you can minimise your trading costs by using the tool.
Trading costs – meaning and types
To begin with, let us briefly discuss what are trading costs. There are several costs associated with the purchase and sale of securities in the market. While there are regulatory costs such as taxes, there are charges levied by intermediaries such as stock brokers and depository participants. Some of the prominent trading costs are as follows:
- Brokerage fee
- Demat account charges
- Security Transaction Tax
- Transaction charges
What is a brokerage calculator
Since the calculation of various trading costs can entail a complicated and time consuming endeavour, a brokerage calculator is a handy tool. You can use a brokerage calculator to arrive at the total costs pertaining to a trade order. Brokerage calculators are designed to be easy to use and yield instant results. Armed with the knowledge of the cost of a particular trade, you can decide whether to go ahead with the order.
How to use a brokerage calculator
In order to calculate brokerage charges using a brokerage calculator, you must visit the official website or mobile application of any credible stock broker or stock exchange and enter the following details about the order you wish to place. After entering the particulars mentioned below, you can click on compute to arrive at the total cost for the trade (based on the prevailing prices, trade volume, market volatility, etc.)
- Name of the security to be purchased or sold
- Quantity of the security you wish to purchase or sell
- Type of order – delivery or intraday
- Nature of the transaction – purchase or sale
How using a brokerage calculator can help you reduce your trading costs
A brokerage calculator is an efficient and accurate tool to assess the cost of a particular trade order. Not only can you compare the costs of various trades but also the cost of the same trade with different brokers. Using a brokerage calculator can, therefore, be of use when you open a demat account and trading account, and compare various brokers. Here is how using a brokerage calculator can help you reduce your overall trading costs.
- By enabling you to compute the different costs for a trade: You can calculate a wide array of costs associated with a trade order by entering a few details into a brokerage calculator. With clarity on the cost front, you can gauge the feasibility of a trade and carry out a cost benefit analysis.
- By shedding light on hidden costs: Another key benefit of a brokerage calculator is that it also sheds light on hidden costs (if any) for a particular trade and broker. Having visibility on the hidden costs can help you make better informed investing decisions.
- By making comparison between brokers seamless: Since you can use brokerage calculators to ascertain the trade costs for orders placed through different stock brokers, it is easy to compare various brokers and their trading account offerings. This knowledge can help you in the process of opening a demat account and trading account and choosing the right brokerage house and brokerage plan.
The Bottomline
Brokerage calculators are efficient tools with widespread application in modern-day securities trading. You can use a brokerage calculator to reduce your trading costs as well as the time and effort required in computing said costs and comparing stock brokers.
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