General
A Quick Guide on Brokerage Calculator
Besides the purchasing price, individuals have to pay several charges while trading in securities. One of them is the brokerage charge that individuals/traders have to pay to the respective broker for conducting trading.
Brokerage is the percentage of the total cost of shares either purchased or sold. It is charged over and above the initial trade value and subtracted from the trader's account. The nominal percentage as brokerage charges can rise up to a larger amount depending on the volume of trade. That’s why traders rely on brokerage calculators to get a rough idea of the monetary outgo beforehand.
Table of Contents
What is a Brokerage Calculator?
What is a Brokerage Calculator?
A brokerage calculator is an online tool that helps traders know the amount they will be paying brokers for particular transactions.
Brokerage calculators feature a formula box where traders have to enter the required details to get the correct result. Brokers or other online platforms provide this tool to offer hassle-free brokerage calculations for carrying out a trade.
First-time traders must know about brokerage calculators to save money. So, let’s dive deeper to find out more about it.
What is the Formula to Calculate Brokerage Charges?
To calculate brokerage, traders have to use the formula mentioned below.
Brokerage = Number of bought/sold shares x Price of one unit of stock x brokerage percentage.
To understand the brokerage formula wholly, one has to solve this with an example. However, the task becomes easier as individuals now no longer need to do this manually. All they need to do is put the data in the respective fields, and the results will automatically appear on the screen.
For example, suppose Ms. Kavita purchases 20 shares of Tata Motors at ₹ 2,000 each and decides to sell those shares at ₹ 2,100 within 10 days.
For this, she contacts a broker named Mr. Jain, who charges 0.5% as brokerage charges. To determine the brokerage charges, Ms Kavita has to find out the total trade value and then the brokerage charge.
Refer to the table mentioned below to get a clear idea.
Thus, it is clear that Ms Kavita will have to pay ₹ 410 as a brokerage charge.
To find out brokerage charges through the calculator, investors have to fill out different options.
- Such traders may find to choose from options including equity delivery, equity intraday, futures, and options.
- Next, they have to choose the order type – ‘buy’ or ‘sell’.
- After that, they have to enter the quantity of the asset they wish to purchase or sell, followed by the price at which they want to conduct trading.
- At last, they have to choose the exchange in which they are planning to complete the transaction and click on the ‘Calculate’ button.
Brokerage calculators not only ease the calculation process but also offer various benefits to traders. Read the following sections to know about these in detail!
What are the Benefits of using a Brokerage Calculator?
Brokerage calculators offer several benefits. These are as follows:
What are the Factors Affecting Brokerage Calculations?
Here is a list of factors that affect brokerage calculations.
Buy or Sale Price
The buy or sale price of each unit of security is one of the major factors that impact brokerage charges. The buy or sale price is directly proportional to the brokerage fee.
Type of Broker
Essentially there are two types of brokers, namely Full-service brokers (offers different services related to trading hence charge more) and Discount brokers (offers a platform for trading hence charge less). Depending on the type of brokers chosen, traders/investors can reduce brokerage charges.
Volume of Transaction
The volume of the transaction is another deciding factor that affects brokerage charges. A larger volume increases brokerage charges. However, often brokers reduce brokerage commission when investors/traders buy/sell in large quantities.
Now that investors know the process to use a brokerage calculator, they can spend their hard-earned money wisely, choose a broker smartly and save a substantial amount.
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