Zero Brokerage Trading Account – Demystifying the Features & Benefits

A trading account is essential to buy and sell financial instruments available in financial markets and on stock exchanges. However, investors bear the burden of brokerage for stock market trades. Brokerage charged by the trading account provider adds to investment costs. Luckily, investors can apply for a zero-brokerage trading account.

What is a Zero Brokerage Trading Account?

Stockbrokers or trading account providers charge a commission for each trade. The commission or brokerage can be a flat fee or a percentage of the total trade value. Investors pay brokerage for each transaction through their trading account, irrespective of sale or buy orders. However, these charges can be avoided with the help of a zero brokerage trading account. A zero-brokerage account does not require paying a commission for each trade. However, the stockbroker will still need to generate funds for operations. Such stockbrokers might levy account opening, Annual Maintenance Charge (AMC), and other charges.

Cost of a Trade with a Traditional Brokerage

Traditionally, investors are required to pay brokerage for each stock market trade. The brokerage for each transaction can change from one stockbroker to another. Usually, the brokerage ranges between 0.01 to 0.5% of the trade value. Some stockbrokers might even apply a flat fee as a brokerage for each stock market transaction. Besides the brokerage, investors must pay account opening, transaction, maintenance, and other charges.

Brokerage charges are usually minimal for discount brokers. However, full-service brokers charge a higher brokerage than discount brokers. Since full-service brokers offer a range of trading services, they usually charge more brokerage.

Recommended Read: Demat Account Fees

Zero Brokerage Trading Model

Gone are the days when there were limited retail investors. The rising number of investors has led to the rise of zero brokerage trading accounts. Discount brokers first emerged due to the increase in the number of retail investors. Discount brokers offer basic trading services with minimal charges. The brokerage charged by discount brokers was minimal or affordable. Since the number of investors increased further, stockbrokers started offering zero-brokerage trading accounts.

Zero brokerage trading accounts have made trading affordable for retail investors. Many discount brokers have made equity trades free for investors. You need not pay a single penny as brokerage charges below a certain value.

Let us say a stockbroker charges a brokerage of 0.02%. You purchase 100 shares of a company worth Rs. 10,000. In such a case, you must pay the stockbroker a broker of Rs. 200 (10,000 * 0.02). Some stockbrokers might demand a flat fee for equity or F&O traders. In case of a zero-brokerage trading account, you will not pay a commission or a flat fee. You won’t be charged for both buy and sale orders in the market.

Recommended Read: Different Types of Futures in Trading

Since stockbrokers do not charge commissions, they apply other charges. Zero-brokerage trading accounts might come with account opening, maintenance, and other charges. The stockbroker requires some funds to continue its operations. It generates revenue by collecting other charges from its customers.

Brokerage Charges for Online Trading

Here are some things you should know about brokerage charges for trading online:

  • The stockbroker asks for a brokerage to place trades on your behalf.

  • The brokerage can change from one trading account provider to another. Also, the brokerage might not be the same for different assets. For instance, the brokerage might differ for equity and F&O (Futures and Options) trading.

  • The brokerage can change based on the value of the trade. Low-value trades might have zero or minimal brokerage. However, the brokerage might be more for high-value trades.

  • The brokerage can be a flat fee or a percentage of the entire trade value. In some cases, it can be entirely zero. Zero brokerage trading accounts offer a cost-effective solution to retail investors. However, it is essential to review all terms of the stockbroker before applying for a zero-brokerage trading account.

Benefits of Zero Brokerage Trading Account

Here are the pros of zero brokerage trading accounts for investors:

  • Fewer Investment Costs: When investment costs are high, investors lose some of their profit. Retail investors can ensure they keep their returns with a zero-brokerage trading account. It makes trading affordable for retail investors with limited trading capital.

  • Zero Holding Charges: Some stockbrokers levy zero holding charges and minimal brokerage. You won’t pay anything for holding stocks, mutual fund units, and other instruments. However, the same cannot be said for holding electronic securities in Demat account. Some Demat account providers might apply custodian charges for holding electronic securities.

  • Enhanced Security: Brokerage-free or zero brokerage trading accounts do not compromise on security measures. Your trading account will be protected by a password, along with other security protocols.

  • Active Trading: With a zero-brokerage account, you can indulge in active trading and make as many trades as required.

How to Choose the Right Zero Brokerage Trading Account?

You must compare different brokers based on a few factors to choose the right zero brokerage trading account. For instance, you must consider the features of the online trading platform before choosing a stockbroker. Does the discount broker offer research services to help you make informed decisions? Are advanced charting and technical analysis tools available on the digital platform? Similarly, one must consider the security features of the trading account/platform. Do not choose an unregistered broker that does not implement security protocols for online trading.

Recommended Read: How to Start Commodity Trading?

Customer support is another factor to consider before choosing a zero-brokerage trading account. You might face technical issues with the trading platform at times. A reliable stockbroker will help resolve the technical issues quickly and start trading.

You must also consider the types of assets the stockbroker offers for trading. Choose a broker that allows trading in equity, F&Os, commodities, currencies, and other instruments.

Final Words

A zero-brokerage trading account can help save on investment costs. You will not pay a commission for each trade with such an account. However, you can be asked for account opening, maintenance, and other charges. Choose a zero-brokerage trading account provider right away!



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