The following example is calculated taking into consideration intraday brokerage rate as 0.03% for buying and 0.03% for selling.
Please note - Currently our intraday brokerage charges are 0.03% for buying and 0.03% for selling,
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Suppose Trader bought Bharati Airtel at Rs.380 and quantity 100 so the total amount trader has to pay is Rs.380 x 100 = Rs.38,000.
Letís see how to calculate the brokerage and taxes.
The buying amount is Rs.38,000 (Rs.380x100 Qty shares)
0.03% as brokerage on 38,000 comes to Rs.11.40
Service Tax on Brokerage (service tax is applicable only to brokerage charges)
The service tax is 10.36%, so 10.36 % for Rs.11.40 comes to Rs 1.18.
Total charges the trader has to pay on buying amount is
The total brokerage + service tax which come to Rs.11.40 + Rs.1.18 = Rs.12.60
Now letís calculate the Brokerage and Taxes on selling amount
Suppose If the trader sold Bharati Airtel at Rs.381 (profit of only Rs 1), Qty - 100 so the amount comes to Rs.38,00 (Rs.381 x 100 Qty shares).
So the trader got the profit of Rs 100.
0.03% brokerage on 38,100, comes to Rs.11.43
The service tax is 10.36% only on brokerage amount, so 10.36 % on Rs.11.43 comes to Rs 1.18.
STT (Service Transaction Tax) is only on selling amount. The STT is 0.025%.
The selling amount is 38,100, the STT comes to Rs.9.52.
Earn 10% profit in one month = 120% per year
How much profit the trader can make in a month? letís see how
If traders follow a simple strategy called ďTake small profits and do multiple tradesĒ which is explained in following example, the traders can easily double money in a single year. That is 10% per month equals 120% per year, which is more than double.
Letís take the following example
Taxes to pay for intraday trading
1. The Service tax is 10.36% only on brokerage.(Update July 2011- The service tax is reduced to 10.36% including education cess )
2. The STT (Security Transaction Tax) is 0.025% only on selling amount.
3. The Stamp duty on total turnover for a day which is 0.002%.
4. and finally you have to pay Regulatory charges on total turnover for a day which is 0.004%
No need to worry about these taxes as all these taxes will add up to very small amount at the end of the day compared to intraday profits. Letís see how in following sub sections
Total charges the trader has to pay on selling amount is = Brokerage + service tax + STT
= Rs.11.43 + Rs.1.18 + Rs.9.52
Total amount you have to pay on buying and selling is (including Brokerage and taxes)
= Rs.12.6 (buying) + Rs.22.13 (selling)
Also you have to pay stamp duty and regulatory charges on total turnover.
Rate - The stamp duty on total turnover for a day is 0.002% and Regulatory charges are 0.004%.
Stamp duty and regulatory charges are applied on total turnover of a day.
The total turnover is calculated by adding the buying and selling amount happened throughout the day.
In above example the Buying amount is 38,000 and selling amount is 38,100 which adds up to Rs. 76,100
Stamp duty is 0.002% and Regulatory charges are 0.004% which adds up to 0.006%
So on total turnover amount of Rs. 76,200 and the stamp duty and regulatory charges on that comes to Rs 4.57
Letís see how it will add up to hundreds at the end of a day
If trader makes only 4 trades in a day then the profit in day adds up to Rs 240 (Rs 60 per trade x 4 trades in a day)
Now Letís see how it will add up to thousands at the end of a month
In a month there are 22 trading days, (Saturday and Sunday are holiday for share market)í
So, letís take 20 days for calculation.
Per day Rs 240 profit then for 20 days it comes to Rs 4800 by investing Rs 38,000
Letís see percentage wise returns
Trader earns Rs 4800 profit after investing Rs 38,000 so the percentage comes to 12.6% per month profit approximately.
Letís consider only 10% profit per month and remaining 2.6% for losses per month.
So the annually the returns will come to 12 months x 10% profit = 120%
Annual returns are 120 % (more than double)
New comers to day trading
New comes to share market can start trading by small amount like Rs 5000 or 10,000 and earn and once this provides experience then further move can be made.
The conclusion is forgetting the "Greed Factor and Taking Small Profits" will make miracle to your Trading profits.
Without investment a single rupee the trading can be practiced using paper trading, for paper trading practice please
So believe in small and end up the month with big profits.
Day trading requires lots of experience and market knowledge. Please visit our "day trading section" for more information.
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So the total amount you have to pay for the trade of buying 100 shares of Bharati Airtel at Rs 480 and selling them at Rs 481 comes to
Rs 34.73 +4.57 (stamp and regulatory charges) = 39.30 which includes brokerage charges and other all taxes.
The conclusion is, the trader paid Rs.39.30 (brokerage and taxes) while the profit earned is Rs.100.
So the Net profit is Rs 60.7 (Rs 100 - Rs 39.3)
Rs 60.7 profit is earned by the trader in single trade by investing Rs 38,000
If the trader makes only 5 trades in a day then very big amount adds up at the end of the month.
And this strategy is called as do multiple trades and takes small profits.
Important note - Rs 1 movement in share price of Rs 300 to Rs 500 happens very easily for many times in a day. So select higher price shares for day trading so that you can take small profits and do multiple trades.
It is quite possible to get Rs 1 profit for Rs 380 share price compared to Rs 50 or Rs 100 share price. So take share price in the rage of Rs 300 to Rs 500 for trading.
How to make thousands in a day?
In above example we have seen how hundreds are made in a day, if trader just doubles the buying quantity that is instead of 100 shares if the trader buys 200 shares then the profits will also get doubled.
But new comers should be very careful, after getting months of experience and profits the trader can double the buying quantities. Day trading is very risky for inexperienced traders.
Trading on Margin Amount
In the above example the margin amount is not used but only the investment amount Rs 40000 is used.
Margin amount is the extra amount given by the broker to trade for a day.
Margin amount varies from broker to broker but generally broker provides 3 to 4 times margin amount.
Big Disadvantage of Margin amount - If you use the margin amount then you have to square off your trades before market closes. Whether you are in profit or loss or else heavy penalty will apply.
Important Precaution - In margin amount the risk is very high. You have to square off your trades on same day.
We advice do not to use margin amount.
Big Advantage of not using margin amount.
If trader donít use margin amount then he can hold trades for next day or as long trader want and sell the shares when the stock price goes up. As the trader is using his own money and not margin amount there is no compulsion of squaring off the trades on same day.