Are you a newbie in the online trading industry and want to know about brokerage calculators? You have come to the right place as this guide will explain everything about a brokerage calculator – definition, calculation, and uses. Online trading in securities involves various transactional charges besides the purchasing price of the securities. Thus, you should be aware of all such trading charges and the ways to calculate them. You may often come across different online tools in the investment platforms such as a brokerage calculator, margin calculator, etc.
But to start with, let’s find out what exactly brokerage means in the field of online trading. When it comes to making a buy or sell transaction in online trading, your stock broker levies a charge in every transaction. This is referred to as brokerage that likely changes depending upon your stock broker’s brokerage pricing mechanism and the type of asset you are purchasing or selling.
Though it may sound simple, brokerage alone can significantly inflate your ownership costs when you are into serious online trading. That’s why it is essential to know the brokerage charges that you need to pay on each transaction beforehand.
What is an Online Brokerage calculator?
A brokerage fee calculator is a nifty online tool that helps in determining the brokerage charges for each buy and sell transaction you are would require to make. You just need to enter the particulars of the transaction you are planning to make and the tool will automatically calculate the brokerage fee applicable on the transaction. Whereas in the case of the margin calculator, you can input your Equity stocks position to get a better understanding of the margin requirement.
While there are a wide variety of online brokerage fee calculators available on the internet, it is highly recommended that you pick one that applies to your stockbroker. It is mainly because different stockbrokers work on different pricing mechanisms.
How to calculate brokerage fees?
Brokerage charges are the transactional fees that stockbroker collect from their traders to facilitate trade. Investors are required to pay brokerage charges both on buying and selling securities. However, there are some brokers who do not charge any fees for an event.
However, in most cases, there’s an initial margin that you need to pay to the broker before the trading starts. The purpose of this amount is to assure security for the broker in situations where the seller or buyer suffers losses in trading. This margin amount differs based on factors like share, index, etc., and can be calculated using a margin calculator.
You may also find brokers who levy a certain ratio of the trade value as their brokerage fees. These trading fees may vary based on the scale of trade value. Here’s the formula to calculate the brokerage fees in the trading market:
Brokerage = Number of shares bought/sold * price of one unit of share/stock * brokerage percentage
What are the factors that determine the brokerage calculation?
Several factors help in determining the stock brokerage calculations that are as follows:
- Buying / Selling Price of Stocks
The buying or selling price of a single unit of security is one of the important factors that determine the brokerage charges of a trading transaction.
- Volume of Transaction
Brokerage calculation largely depends on the volume of security transactions. A larger volume of transactions leads to a higher brokerage amount. However, you may find many investment platforms that charge reduced commission percentages when you trade in large quantities.
- Types of Brokers
There are usually two types of security brokers that include full-service brokers and discount brokers. While full-service brokers offer several trading services such as researching, managing sales, etc., and charge higher brokerage fees, discount brokers just provide a trading platform and charge small brokerage fees.
What are the benefits of using a brokerage calculator?
The benefits of using online brokerage calculating tools are as follows:
- Online traders can use online brokerage calculating tools to compare between different security brokers levying brokerage commissions.
- A brokerage calculator eliminates the need for manual calculation that might turn out to be inaccurate.
- Online brokerage calculators deliver accurate results instantly.
- These online brokerage calculating tools are free tools and you don’t need to pay any usage charges. All you need to do is enter the required details i.e. number of shares, price of one unit, etc. and you can get the calculated numbers within seconds.
- It calculates all the trading costs. Right from GST, STT to Custom Duty, you can estimate all the additional charges involved in the trading process.
Using online tools such as the brokerage calculator, margin calculator, etc. you can evaluate and compare the brokerage commissions before choosing the ideal security brokers for trading. Now that have read the entire guide on the usage of brokerage calculators, you can be aware of all the transactional charges involved with online security trading.