Through this blog, we shall highlight some of the major advantages of stock trading via Discount brokers. You will also go through a quick comparison: Discount Brokers vs Full Service Brokers in India that shall guide you in making the right selection as per your priorities.
Stock Trading Strategies: A Glimpse
Studies have found out that in the long run, businesses with the lowest cost structure survive. Businesses move in cycles, when the times are good everyone flourishes but when the cycle turns, only those who manage to keep the neck above water are the ones with the lowest cost structure.
Same is the case with stock market trading where the trader, based on his strategy transacts frequently in the market. A trader goes through the win loss cycle on a daily basis. A fact about trading is that a good trader has a win-loss ratio of 1, that is, one win trade for every loss trade. The really good ones who are among the star traders in the world will have the win-loss ratio of 0.7 or seven win trades for every three losses. The win-loss ratio of the world-famous group of traders called Turtles was 0.4 or only forty percent of their trades were profitable.
But, the key factor here is that everyone makes more on an average on every winning trade than they lose on a losing trade. This being the case traders tend to trade every signal they get not knowing which trade will go to the fence. The Pareto principle or the 80-20 rule is very much valid in trading. This means that 80 percent of a traders profit comes from 20 percent of the trade.It is thus important for a trader to swing at every signal that comes his way.
Since, the number of trades is high, the trader needs to keep his cost as low as possible. As Benjamin Franklin said, “nothing is certain except death and taxes”, a trader can do little about them. The only way to cut his cost is to bring down the brokerage rate, for which there is no better alternative than going to a discount broker.
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Discount Brokers: Meaning
As the name itself suggests, Discount brokers are the trading platforms that offer brokerage services at a discount. So, basically you get a platform to buy/sell shares by paying less brokerage. Discount brokers are a good choice for the ones who like DIY (Do-It-Yourself) approach.
Discount Brokers vs Full Service Brokers:
In the present scenario, you will come across both discount brokers and full service brokers in India. It’s you who has to decide which one to select based on your requirements. Looking for advisory and trading facilities both, you may like to go for a Full service broker. Just looking for a trading platform and not any advisory services, a discount broker might be your preferred choice.
A discount broker offers various advantages for a stock trader as compared to other brokers, the important ones have been listed here:
1. Lower cost:
The lower cost of every trade is the biggest advantage for a trader. In the long run, the savings through brokerage by trading via a discount broker can make all the difference, especially since every small percent saved in brokerage with each trade will have a compounding effect on the trader’s earnings.
2. Smaller break-even:
As the cost of transaction is low, the stock has to move only a small distance in order for the trade to break even. Even if the stock stalls and the trader exits, he will be losing much lower if he trades through a discount broker.
3. Lower exposure time:
In general, many times a trader has to hold on to his position for a longer period of time in order to recover the cost. This may expose him to some further risk. However, this risk can be mitigated by trading with a discount broker as he can exit earlier.
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4. Good Online trading platforms:
Discount brokers are a great fit for the people who are comfortable in doing their own research and are not willing to take any additional services like research or advisory etc. With the advent of technology and automation, you can have access to online trading platforms plus useful trading tools and apps to ease out things for you.
5. Unbiased service:
A discount broker treats all his clients equally. As a discount broker does not offer investment advice, his service is related to operational issues which are common for all clients.
Trading is a serious business and every successful businessman is standing because of the wise decisions that he has taken. He has no one to blame for his mistakes, if he fails and no one to congratulate but himself if he succeeds.
A discount broker offers a high-quality trading platform to the trader where he can practice his skills and the reward, recognition or pain is the trader’s own doing. This sounds fair, especially if the cost of using the platform is substantially lower.
These technology driven low cost platforms provide a wide range of plans based on your stock trading requirements. A good customer support, bringing for you the best customer experience to smoothen your trading journey is their main focus.
Disclaimer: There is a high degree of risk involved in stock trading. The details given on this website are for informational purpose and cannot be constituted as professional advice in any regard.
What do you feel about the emerging Discount Brokers in India? Have you tried using any of these online trading platforms? What is your take on Discount brokers as compared to the traditional or full service brokers in India? Which one do you prefer while stock trading? Do share your valuable feedback on the same.