As a retail investor or trader, the only way to buy and sell shares or any other listed securities from the market is through a stock broker.
Stock broker is a registered intermediary that acts as mediator between buyers and sellers. You must open your account with a good stock broker to buy or sell stocks.
A revolutionary change in the brokerage industry occured with the move to low commission.
Brokerage firms in India can be broadly divided into following two categories based on brokerage they charge and additional services they render;
- Discount stock broker
- Full-service broker
Discount stock brokers are those registered intermediaries that offer low brokerage commission, sophisticated charting softwares but provide little or no investment advice.
Full-service brokers offer high commission but in addition to allowing you to buy and sell stocks, they can assign you to work one-on-one or through a representative for an annual fee or as we said costly commission.
Popular discount brokers include Zerodha, Upstox, Angleone, 5Paisa, fyers and Groww.
Full-service brokerage firms include, Motilal oswal, ICICI securities, HDFC securities, Aditya Birla, Sharekhan, Kotak Securities, Axis and SBI securities, to name a few.
Steps to choose a stock broker
In intraday trading, you want to have a stock broker who has easy-to-read charts, offers timely fill, easy to navigate trading platforms, low brokerage commission rates and secure websites.
Most of these discount stock brokers are offering online educational resources, webinars and articles on trading and investing.
You can ask other traders which stock brokers they recommend.
Lack of customer support is the main disadvantage with discount brokers. These people can only offer help with their software.
Here are certain parameters to compare a stock broker for day trading or investing;
- Brokerage commision charged for intra day, delivery of equity and options;
- Annual maintenance charges;
- Demat charges;
- Kind of charting software they offer (Some discount brokers give you access to experiment with their trading software and charts before opening an account). Full service brokers may charge you for charting software, whereas, discount brokers are giving it for free with an annual maintenance charge of around Rs. 300 to Rs. 350;
- Margin rates (the amount of interest you will be charged if you borrow from the stock broker);
- A well organised order entry screen, a quick confirmation system, account balance, portfolio and position updates at one place;
- Alternative ways of reaching the broker. When the market plunges, or due to server errors orders are not getting filled, you should have access to the broker to help you out.
It’s always advised to have a brokerage firm that can answer questions even when markets are closed.
Beginners are always recommended to start with paper trading before risking real money. There are websites like “tradingview” that allow you to practice paper trading before risking real money into the market.
Most important service a stock broker can give you is to fill your orders quickly and accurately. The faster your orders are filled, the better price you get.
Nowadays, with a minimal payment of Rs 300 to 500, you are getting access to good charting software and a well organised web platform from almost all discount brokers. For which full service brokers might charge you high commission and monthly charges.
Many stock broker’s charts are not detailed enough, they don’t have indicators and oscillators you need for intraday or short term trading for decision support.
Before selecting your stock broker we encourage you to research at least 4-5 systems before you choose one. Visit each stock broker’s website to get information.
Nowadays, many fine charting software packages exist in the marketplace. Tradingview.com and investing.com are the two most popular web based charting software used these days. Remember, they don’t offer real time charts for free users. You have to access their paid packages to get real time charts and access to the software.
In addition to stock brokers, you should have access to financial news and websites to update on latest news on a regular basis.
If you intend to jump into intraday or day trading, then you can consider opening your account with a discount broker.
Instead if you want to jump into investing at a slower pace in addition to other services and trade on a part time basis, an account with a full service broker should be sufficient.
You can have two accounts with two separate stock brokers in order to manage your investing and trading separately.
Disclaimer: In addition to the disclaimer below, please note, this article is not intended to provide investing or trading advice. Trading in the stock market and in other securities entails varying degrees of risk, and can result in loss of capital. Most investors and traders lose money. Readers seeking to engage in trading and/or investing should seek out extensive education on the topic and help of professionals.