Have you ever wondered how a stockbroker calculates their brokerage fees? Is it possible to calculate which broker will offer you the best span margin? Despite the brokerage rates stated at the outset, do you still have concerns about the charges levied on your trades? We'll look into how these fees are calculated. 

Brokerage

A stockbroker provides you with a trading facility in the stock market in exchange for a commission. The commission that is charged, usually as a percentage of the value traded, is known as the "brokerage." 

The brokerage fee is specified in the contract and is a fixed percentage deducted from your portfolio by the broker. Let's take a look at some simple brokerage calculations.

Examples

Assume you purchased 100 shares of TCS at र3000 each. You then sold those shares four days later for र3300 each. The transaction value, in this case, would be: 

र(100 x 3, 000) + र(100 x 3, 300) = र( 3, 00, 000 + 3, 30, 000) = र 6, 30, 000 

Because this is a delivery trade, the standard brokerage is 0.4 percent. To calculate your total brokerage charges, multiply the percentage by your total traded value. Which will be: 

र 6, 30, 000 x 0.4% = र 2, 520 

As a result, the total brokerage charged to you in this buy and sell transaction of 100 TCS shares is र2, 520. 

If your traded value is lower, say you buy 10 Aptech shares at र400 each and sell them a few days later at र420. In this case, your total traded value is as follows: 

र(10 x 400) + र(10 x 420) = र(4, 000 + 4, 200) = र8, 200 

0.4% of र8, 200 yields a result of र32.8. However, full-service stockbrokers have the lowest brokerage charge limit. This usually ranged between र20 and र30. This means that the brokerage charge cannot be less than the lowest limit, no matter how much you trade.

Negotiate your brokerage

Stockbroker executives will discuss brokerage charges of 10 paise or 50 paise. However, this does not imply that you will pay that amount as a brokerage fee. You will be charged 0.10 percent or 0.50 percent, respectively, according to industry jargon. 

There is simple brokerage span margin calculator available online to help you do the math quickly. You can also negotiate the brokerage fees with the stockbroking firm's executives. Brokerage rates can always be negotiated, even if the executives are not open about it. If you have large initial capital or are willing to commit to a high turnover, you will have a better chance of negotiating. 

Discount Brokers

There are also discount brokers who charge a flat brokerage fee regardless of the traded value. A discount broker, such as 5Paisa, will charge you र10 per order executed as a brokerage fee. Your traded value could be र1, 000, र10, 000, or even र100, 000; the brokerage fee would be ten percent. Similarly, other discount brokers will charge you between र10 and र20, regardless of your trading volume. 

You will even find a few discount brokers that provide flat monthly and annual plans. These plans provide you with unlimited trades for the duration of your subscription and are ideal for heavy traders. 

There are even brokerage firms that charge clients a monthly/yearly fee based on the trading platform. This feature allows their clients to trade in any segment, as many times as they want, and for any amount. 

Your trading strategy will be the determining factor in deciding which stockbroker's offerings will be the best for you. Once you've got that sorted, you can easily use a brokerage calculator to determine which brokerage house offering is best for you.