The stock market offers numerous opportunities to earn significant returns. It can be through a long-term investment strategy or short-term trading style. One of the short-term trading styles is intraday trading. Intraday trading is based on short-term market fluctuations.

How to do Intraday Trading

Day traders need to buy and sell the stocks necessarily within the same trading session. They need highly liquid stocks as they trade frequently, and trade can last for a few seconds, minutes, or hours. A day trader must exit from the positions before closing the trading session. If not so, the stockbroker can change its status to delivery trade or square off the position at the prevailing stock price. An experienced trader in the stock market can make profits significantly. Otherwise, you may have to struggle to save your invested funds.

Brokerage fee and its impacts on day trading profits

An individual engaged in intraday trading needs to pay brokerage fees to the broker to execute trades. There is a huge difference between delivery and intraday trading, and the fee also differs. The brokerage fee is one of the factors considered by intraday traders. 

Brokerage is the fee charged on every trading transaction facilitated by a stockbroker on its online trading platform. 

Intraday traders place trades multiple times within a trading session. With such a huge volume of trade, the brokerage fee becomes a big amount and becomes a concern for traders. Brokerage is charged as a percentage of the trade value. 

The brokerage fee reduces your profits earned from intraday trading. It is deducted from your day trading profit. The higher the volume of trading, the higher the brokerage.  

Let us understand the impact of brokerage on profits from day trading. If stocks were purchased for Rs. 1 lakh and sold for Rs. 1.1 lakhs. The total trade transaction for a day is 2.1 lakhs. The broker will charge the brokerage on the total trading value of Rs. 2.1 lakhs. If the brokerage is 0.5%, you need to pay 0.5% of 2.2 lakhs = Rs. 1050. It will be deducted from your profit of Rs. 10,000.

Factors impacting brokerage calculations 

• Buy/sale price 

Brokerage is directly proportional to the security price at which it is purchased or sold. Generally, brokerage is calculated on both sides - buy and sell. 

• The volume of trading transactions

Brokerage largely depends on the volume of the transaction. The larger the volume, the higher the brokerage amount. Brokers can reduce the brokerage fee if the trading volume is huge.

• Type of stockbroker

You can approach a full-service stockbroker or a discount broker for an instant demat account and online trading platform service. Full-service brokers assist their clients with research and advisory services. Therefore they often charge a high percentage of the trades as the brokerage fee. Discount brokers are limited to trading platforms; therefore, they charge low brokerage costs accordingly.

You should understand the types of trading fee before you engage in day trading.

Intraday Trading Fee 

• SEBI regulatory charges

This is a minimal fee charged by the Securities Exchange Board of India (SEBI). It is as low as 0.00010%. All stock exchanges in India charge it for each trade, whether a day trading transaction or delivery trade.

• Transaction charges

Transaction charge is the fee of the stock exchange. BSE charges vary by the scrip group, and it is 0.00345% per transaction with NSE. It differs for different stock exchanges.

• Securities transaction tax (STT)

It is the charge on the sell-side. The STT is charged 0.025% on the intraday trades.

• Brokerage charge

Brokers charge brokerage fees on the trading value. Discount stockbrokers offer subscription-based trading brokerage plans to save trading costs. You can choose from multiple brokerage plans based on your trading requirements.

• Stamp duty

The stamp duty on trading transactions is now the same for every location. Earlier it varied with the location. 

With such explanations on trading costs, you can understand how brokerage impacts your day trading profits. You can shortlist some reputed discount brokers offering affordable trading subscription plans and a low-cost margin trading facility.