For every trade you place in the stock market, you need to pay a certain fee or commission to your stockbroker. Now, these charges vary from broker to broker, but the question here is how is brokerage calculated?
Now on the broader level, there are two types of stockbrokers, full service and discount brokers. The former charges a brokerage on the turnover value while the discount broker charges a flat fee.
Let’s understand the formula and the steps involved in calculating brokerage.
How to Calculate Brokerage on Shares?
To understand how is brokerage calculated let’s take an example. Here let’s first find out the brokerage fees for trading with a full-service stockbroker.
Suppose you are executing an equity intraday trading order with a full-service broker who charges 0.03% of the turnover value as brokerage.
Let’s now find how is brokerage calculated in intraday trading.
Here let’s assume that you bought 50 shares of Coal India at ₹214 per share in the morning when the market opened and sold them at ₹225 at 3:15 PM when the market closed.
So your total trade turnover will be
Turnover = (Buying Price x Quantity) + (Selling Price x Quantity)
So the total trade turnover for this order is =214×50 + 225×50=₹21,950
Brokerage for this order will be 0.03% of ₹21950 = ₹65.85
Now let’s suppose you are executing the same order with a discount broker who charges Rs. 20 per executed order or 0.05% (whichever is lower) on total trade turnover for Intraday trading.
Total Trade Turnover = ₹21,950
Brokerage= 21950 x 0.05%= ₹10.975 but if the brokerage exceeds ₹20 per executed order then as per the broker’s rules, in this scenario, you will have to pay ₹20 for taking a position and another ₹20 on squaring off the position.
In this way, you can calculate brokerage charges in any segment like equity delivery, currency commodity and derivatives.
Knowing brokerage in advance for an order you want to execute gives you an edge in stock market trading or investing.
You can choose to open a Demat account with a stockbroker whose charges are on the lower side of your desired trading segment.
