Understanding Zerodha's Trading Fees for Multiple Trades of a Single Share

Many investors often question how brokers like Zerodha charge for multiple trades of a single share in a single day. In this article, we will explore the intricacies of Zerodha's fee structure and how it affects retail traders and large volume traders.

Brokerage Charges Explained

When trading stocks, it's important to understand how brokers compute their charges. Zerodha, for instance, employs two different methods: a flat brokerage rate and a per order basis charge. Let's dive into each approach and see how it impacts your trades.

Flat Brokerage Rate vs. Per Order Charge

Consider two scenarios:

Flat Brokerage Rate: For instance, a flat rate of 2 paisa per lakh (0.002%) can be applied. Per Order Charge: A fixed charge of 20 rupees per order is applied.

Let's examine the following trade: if you buy 100 shares in two installments (50 shares each) and sell them in four installments (50 shares each), we can calculate the brokerage for both scenarios.

Scenario 1: Flat Brokerage Rate of 2 Paisa Per Lakh

In this case:

First buy: 50 shares at Rs.200 each. Total order value Rs.10,000. Brokerage (10,000 x 2)/100 Rs.20. Second buy: Another 50 shares at Rs.200 each. Total order value Rs.10,000. Brokerage (10,000 x 2)/100 Rs.20. First sell: 50 shares at Rs.205 each. Total order value Rs.10,250. Brokerage (10,250 x 2)/100 Rs.20.50 (rounded to the nearest rupee Rs.21). Second sell: Another 50 shares at Rs.205 each. Total order value Rs.10,250. Brokerage (10,250 x 2)/100 Rs.20.50 (rounded to the nearest rupee Rs.21).

Total brokerage for the entire trade would be Rs.82.

Scenario 2: Per Order Charge of 20 Rupees

In this case:

First buy: 50 shares at Rs.200 each. Total order value Rs.10,000. Brokerage Rs.20. Second buy: Another 50 shares at Rs.200 each. Total order value Rs.10,000. Brokerage Rs.20. First sell: 50 shares at Rs.205 each. Total order value Rs.10,250. Brokerage Rs.20. Second sell: Another 50 shares at Rs.205 each. Total order value Rs.10,250. Brokerage Rs.20.

Total brokerage for the entire trade would be Rs.80.

Why Zerodha's Fee Structure Matters to Retail Traders

Advantage of the per order method is that it simplifies calculations and reduces confusion. However, for retail traders, this structure can be advantageous as it stabilizes the total brokerage cost as the number of transactions increases.

For example, if you buy 200,000 shares (100,000 in two installments) and sell them in four installments, the calculations under a per order charge of 20 rupees per order would be:

First buy: 100,000 shares at Rs.200 each. Total order value Rs.20,000,000. Brokerage Rs.20. Second buy: 100,000 shares at Rs.200 each. Total order value Rs.20,000,000. Brokerage Rs.20. First sell: 50,000 shares at Rs.205 each. Total order value Rs.10,250,000. Brokerage Rs.20. Second sell: 50,000 shares at Rs.205 each. Total order value Rs.10,250,000. Brokerage Rs.20. Third sell: Another 50,000 shares at Rs.205 each. Total order value Rs.10,250,000. Brokerage Rs.20. Fourth sell: Another 50,000 shares at Rs.205 each. Total order value Rs.10,250,000. Brokerage Rs.20.

Total brokerage 100,000 100,000 50,000 50,000 50,000 50,000 Rs.350,000.

Key Takeaways for Retail Traders

1. Flat Brokerage Rate: The advantage is consistency in costs as you make more trades. However, it can become more expensive compared to a fixed per order charge as the number of trades increases.

2. Per Order Charge: Simplifies calculations and is cheaper for a higher number of trades. However, it can lead to confusion and discrepancies in cost perception.

3. Professional Consideration: Discount brokers like Zerodha are designed for large volume traders who can benefit more from a per order charge system. Retail traders should carefully consider the fee structure to find the most cost-effective solution for their trading needs.

Conclusion

In conclusion, understanding Zerodha's trading fees for multiple trades of a single share is crucial for ensuring you are not overcharged. Both flat brokerage and per order charges have their pros and cons, and the right choice depends on the number and frequency of your trades. If you frequently trade, a per order charge might be more beneficial, while if you trade less frequently, a flat brokerage rate could be more cost-effective.

Contact Us for Further Details: If you have any questions or need more information about our fee structures, feel free to reach out. We are here to assist you in making the best decisions for your trading journey.

Regards,
Rakesh Singh
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