How to Select the Right Stock Broker
When I started my trading journey in 2009 there was not much options available and like everybody else, I started with Banking Broker. I started with ICICI Direct and within 3 months it was visible that bulk of my profits were going into commissions and government taxes levied on it. With high brokerage it was difficult to even think about Intraday trading or swing trading where profit margin was less compared to positional trading.
Throughout my trading journey I have been Investor, Swing Trader, Intraday Trader, Scalper, Expiry day options trader, Options Strategist and have experienced all kind of trading. For last 3 years after testing everything in 12 long years, I settled into Options Trading. In Options, I trade positional strategies, investments, intraday strategies and naked selling. So when it comes to choosing a broker, it was very difficult and it was after trial with almost every broker, I came to following conclusion. A good stock broker must provide following benefits:
Trading Applications for all platforms
Leverage if needed
Funding against collateral
Reputed Broker:Broker should be of National Level and not a local broker. National Level brokers follow the compliance standards set by SEBI and stock exchanges to maximum level. Rules can be bent with local brokers. Broker should not be diversified into non core business. Problem with #KarvySecurities occurred because they were invested outside of core business.
Reliable System:What if you have open positions you need to exit and due to volatility in market you cannot login and square off your positions. That is reliability of broker. Often times it happens with discount brokers that when volatility or black swan event or important event is there, users are not able to login. It is because discount brokers are operating out of single place and have less investment into network infrastructure than a traditional full service broker who has office location throughout major cities. Worst case is that if loss occurs, broker is not responsible. So reliability of system is with Full Service brokers.
Full Service or Discount Brokers – As I said, apart from low brokerage which apparently full service brokers are also providing, discount brokers do not provide any other value so should be ignored.
Trading Application – A good broker should have trading applications developed across multiple platforms. What if you need to trade fast from your own desktop? What if you are travelling or in office and need to trade from your mobile app? What if you are on public computer or Mac OS and have to trade on Web Application?
Lowest Brokerage – Need I say more. Brokerage saved adds to profit at end of day.
Leverage – Leverage is a double-edged sword. It can help you double the profit as well as losses. I consider it as a tool. Discount brokerage cannot go beyond a particular level to give you leverage whereas full-service brokers can provide leverage based on need. For e.g. I trade on Weekly Expiries and take 15 times leverage for Option Writing. Discount brokers provide maximum of 3 to 4 times leverage which is not enough.
Collateral Funding – You have ₹10,00,000/-. You want to invest ₹5,00,000/- which makes only ₹500,000/- available to you for intraday trading or Option Writing. With collateral funding, you can get margin upto 90% or 100% based on share or FD and trade in full with ₹10,00,000/- while you get the benefit for your shares or FD. You can even invest complete ₹10,00,000/- in FD or shares and trade with collateral margin provided you have to meetup for m2m obligation in case of loss. Discount brokers do not provide this feature in entirety.
Trading Platform for Desktop – I always look for ODIN/NEST. These are the industry standard applications and fully customizable to users need. Many brokers provide proprietary software which are good in their own way but also deficient in many aspects.
So to conclude, the features I look for are provided by only 3 brokers I know:
Here is the comparative analysis of the three brokers:
As you can see, discount brokers do not provide any value which full service brokers are already providing with discount brokers too.
Personally, I am trading through Nirmal Bang Securities as I manage a lot of accounts and once account is set I have never faced any problems with them. The day I decide to manage only my own personal account, I will shift to Angel Broking or IIFL based on my need for even lower brokerage.
New traders should carefully check these features and their importance before deciding to work with a broker. You can open account with as many broker on testing basis but over time you will be incurring account maintenance charges so better chose a good broker to start with. It is a pain later to close the accounts once charges accumulate.
How to Open an account and avail the services
Basic Documents Required:
Adhar Card linked to Mobile No. for e-verification
PAN Card (Mandatory)
Cancelled Personalized cheque for Bank Account Linking (Name and Account Number should be there on cheque)
6 Month latest bank statement or latest ITR acknowledgement for Derivative Segment Activation (Name and Account Number should be there on statement)
Nominee details required
For Angel Broking iTrade Prime Plan (Flat Rs. 20/order) click on the link and follow instructions: https://5minwebsite.angelbroking.com/Diykyc/SubbrokerLead?SbTag=Uk9JUg==&BType=SVRQ
For Angel Broking iTrade Plan (Order Size less than 50,000 = Flat Rs. 15/order and more than 50,000 Flat Rs. 30/order) click on the link below and follow instructions: https://5minwebsite.angelbroking.com/Diykyc/SubbrokerLead?SbTag=Uk9JUg==&BType=VkJC
For Account Opening based on your need with Nirmal Bang Securities or IIFL Securities, you can contact me on 70180-13195.
Note - These services are only provided through specified sub-brokers and not to general public as these are negotiable from person to person, so don't be surprised if you approach the branch and get different brokerage plan and leverage.