Last updated on January 30, 2018
In case you are in search for an answer to high transaction costs that is haunting the financial sector, you search ends at the Discount Broker. A discount broker is not like any low-cost airline frill broker. The broker offers the platform for the services and the transaction necessary for completion of a transaction. For a customer, the costs of brokerage are very important for him to survive in the trade. You can gather information from any source in these days of technology which is available on the internet, periodicals, newspapers, and websites. There are present many paid content providers and newsletters that furnish you with investing and trading ideas at a fixed fee.
Advantages of discount brokers
There is a difference between a discount broker and a full-service broker that can be understood by the transaction cost on low-cost stocks or cost on options trading. Many brokers charge low amount for stocks below a certain price. In this way, they protect their brokerage in a better way as low priced stock would fetch them little brokerage in case it is calculated regarding percentage. Likewise, in case of options trading which are usually reduced priced especially made out of the money options, many brokerages offer per contract a flat amount. In this form of calculating brokerage has a great effect on the profitability of the customer.
Another advantage that can be counted for engaging discount brokers is that they are not biased. They do not offer any advice so they will never pressurise you to sell a good stock and in the meantime will not make you buy stock. The brokers will not trouble you with their calls and make you remind of all those trading calls that did click easily and ignoring others that did not perform.
For the past decade, Indian financial markets have seen a major change for betterment. When you talk of electronic trading that has brought about transparency in the market that was infamous for opaqueness, has cut down cost also. As you consider internet trading, it has taken cost and transparency parameters altogether to a new level. Internet trading has done a new thing by bringing in a set of brokers who are geared to provide rates that are rock bottom for transactions. These brokers are known as discount brokers in the phraseology of industry.
It is quite clear that a broker charges brokerage to provide a platform for the transaction. In case of traditional brokers, there is a high charge of brokerage as they claim to give you value addition by providing research calls. Although, a traditional broker may appear quite compassionate by claiming that his entire well-researched calls are the product of a large team of highly qualified and experienced highly paid analysts who are there with the sole goal of assisting customers to swell their wealth, whether it is reliable is something different. When a client transacts, the broker makes money. As much as the client transacts, more and more brokerage goes to the pocket of the broker. Usually, the brokers have different rates of brokerage that depend on the customer and the amount of trading. Normally brokerage is lower for a client with high volume trade as they aggressively carry forward their business and on the other end, the retail client has to pay more.
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