Skip to main content

What is meant by delivery trading and brokerage?

By
hand and pen pointer, chart
Delivery trading is a secure form trading in which a trader either buy or sell share but does not square off the position same day. Transactions like these are settled as per T+2 settlement cycle of the exchange.The shares which you bought will reflect in your demat account. It is most common type of share trading preferred by stock market investors and traders.Once you have taken the delivery of shares you can hold them as long as you want. Their is no limit for that.But for taking delivery sufficient fund must be present in account as no margin is provided here to buy shares.
Delivery brokerage also known as equity delivery brokerage is the brokerage which is charged on a delivery trade that has to be settled in T+2 settlement cycles. Usually brokers charge different brokerage for intraday and delivery trades where intraday brokerage is less than delivery brokerage. The reason behind it is that risk in delivery trade is high and margin obligations remain blocked for T+2 days.
Advantages of delivery trading
  • There is no time limit here for selling of stocks. Traders can hold shares as long as they want to and wait for getting required profit.
  • Other benefits like dividends, split of stocks, bonus shares can be availed. These benefits companies offers to its share holders time to time and by holding shares for longer duration you can get those benefits.
Disadvantages of delivery trading
  • Traders are required to pay full price of shares for taking the delivery of shares. As in case of margin trading only a portion of total amount is to be paid.Traders can buy more shares in less amount with margin trading but not with delivery trading.
  • Brokerage charged by brokers is high as risk involved with this types trading is relatively high.Services of discount broker can be helpful as they charge less brokerage then full service brokers.
  • There can no be short selling with delivery trading.You have to hold the share before you can sell them.
Some tips to earn good returns in delivery based trading
  • Try to buy shares of different companies from different sectors instead of investing entire sum of money on shares of single company.By doing so loss earned by stocks present in your portfolio which under performed will be compensated by those which outperforms.
  • Keep good patience with market fluctuations. Share prices keeps on fluctuating but do not panic with such fluctuations.
These are some important points related to delivery based trading. Whether a trader opt for delivery based trading or not it depends on factors like financial capability and willingness to take risk.
Labels:

Comments

Post a Comment

Popular posts from this blog

What is MIS, NRML and CNC order types in stock market ?

By
MIS (Margin Intraday Square Off) MIS order types are for intraday traders and need to squared off during the same trading day. It will be activated till that particular trading day only.The biggest advantage of this order type is that while buying shares using it traders need not to pay the entire amount only a margin amount is required to be paid.Because of this feature traders can buy more number of shares with less capital. If in case position is not squared off or converted into other order types by the traders end then it will be automatically squared off by RMS few minutes before the market closes. If you want to strictly trade on intraday basis then you can rely on usage of such order type. As here you need to worry about squaring off your position, it will automatically get squared off before market closes. NRML (Normal Order) NRML order type is used while trading in future market. It is used to carry forward trade orders in derivatives segment. This order type w...
Post a Comment
Read more

Buy back stocks: Meaning, advantages & disadvantages.

By
Meaning of buy back stocks Buyback stocks is a process where companies repurchase its stocks from stockholders or open market. This is generally considered to be a good sign as it is one indirect way for companies with surplus cash to maximize the wealth of its stockholders.A company with surplus cash prefer to buy its stocks when current market price of stocks is less than book value or what they expects it to be. Companies buy their stocks at a premium price and this leads to increase in stock price. Possible reasons for buyback are discussed below: 1) To increase stockholders value as company uses its surplus funds which is not suitable for any investment options it results in higher earning per share. 2)For protection against corporate takeovers. Buyback helps in increasing the promoters holding thereby reducing the chances of takeover. 3)To improve financial ratios as buyback reduces the cash component on companies balance sheet. Advantages of buyback : 1)Com...
Post a Comment
Read more

How to open a Demat account and what benefits are offered by dematerialization?

By
With the introduction of new technologies trading in the stock market has changed a lot. Earlier when BSE was formed in 1875 at that time traders and investors used to stand on floor and shout prices of stocks for buying and selling. The money was exchanged between buyer and seller and a physical copy in the form of certificate was issued to the buyer.The entire process was very time-consuming. In 1996 concept of dematerialization was introduced in share market. Physical copies of shares were replaced by electronic form and were credited and debited from the Demat account of a trader. Following are the benefits offered by dematerialization : 1)Common bank In Demat account along with shares, other financial instruments like bonds can be stored as well. Traders can use the same account to trade in stocks and bonds both. 2)Time and cost To deliver a physical copy of shares cost is involved and also it takes the time to do so. With dematerialization, this cost and time c...
Post a Comment
Read more