If you are planning to begin an online share trading, then it is important to start with a right broker. Online share trading sites offers a convenient way of trading for a professionals who gets less time from their work, especially on working days, when markets are open. Also with Mobile trading becoming more prevalent, now a smart phone can become a trading engine even on the move.
Online platform also enables a person to learn investing or trading in his own way and at his own speed. One doesn’t need to take unnecessary calls from dealers of a broker insisting for trading. In couple of instances, it was seen that dealer made all kind of promises including “extremely high returns” and “capital protection” before and resulted in huge losses within few days.
Most of brokers offers a online share trading platform however it is important to take a right selection. Most of broker advertise only the best part from their proposition and hide the factual charges or offerings. In certain cases, all parts are not disclosed even at account opening and one only get to know about certain charges once they are already levied. Here, in this article, we will discuss the criteria for choosing a online trading sites or broker, which should be discussed in detail.
Generally the platforms offered by brokers are responsive, which means that their layouts are friendly to all devices like mobile and tablets. If your platform is not very attractive on mobile, then it is the time to change. Other points to be checked is the user friendlyness, speed of rates refreshment, ease of access to records of transactions and financial ledger. Broker like Zerodha has also integrated System trading or Algo trading in its terminal as such anyone can initiate a rule for trading and let computer trade from him.
Brokerage is the cost of transaction that a broker charges from a client for each transaction. These brokerage cost is levied as percentage on the turnover value however new age discount broker are charging on per trade or per month basis which turnout to be about 10% from that of normal broker. Typical question that you must clarify are
How do you charge brokerage i.e as percentage of turnover, per trade or per month basis?
What are brokerage rates for Delivery, intraday, futures and options trade?
Do you have any minimum brokerage clause may on each trade, each share or each contract note?
Does this brokerage remain same or increase due to change in method of placement say telephonic trades or due to dealer assistance.
Apart from brokerage, brokers also levy plethora of other charges. Few of them are mandatory like SEBI turnover charges, exchange turnover charges, stamp duty, service tax etc. In certain case brokers also charge additional charges for sending physical contract notes through courier, placement of trades telephonically, etc. Also DP charges are a separate sheet where apart from annual AMC, transaction charges are also levied.
Another typical charge is Delayed Payment charge which is generally @16-18% for any shortfall in payment whether towards delivery buying or MTM. Interestingly, broker do not provide any interest on balance of a client lying with them.
Brokers are mandated from exchanges to keep a specified margin from each client. So for future and options, it will not differ. However for delivery and intraday turnover in cash market, you should confirm beforehand. You may also specify on the mechanism of giving margin, say cash or shares, etc.
Though you may insist on higher leverage, but keep in mind that increased leverage is a big risk to your capital. Also all brokers put a condition of auto square off on position taken on intraday basis in cash market. This square off is done at about 3 to 3.05PM in the afternoon.
If you are planning to invest bigger corpus, then it is better to check on the broker background. The exchanges keep their margin in the pool so if any bigger client loses, the fund of smaller client are used to fund the broker shortfall (at exchange level). Thus exchanges have mandated brokers to keep a segregated funds for each client. Keeping a check on the broker background allows you to establish your trust on him for you parked fund.
If you are a trader that keep looking various markets for trading, then it is must for you to enquire about the segment offered. The broker can offer only those segment where he has obtained a membership of exchange. these segments are like BSE cash segment, NSE cash segment, NSE F&O, BSE F&O, MCX-SX currency, MCX-SX equities, commodities and so on….
I know you may be thing that it is too much to ask or enquire. But you do not need to do it all always. Better is to ascertain your way of trading and then see what all is going to impact you. Once decided, your question will look more obvious.