Whether you are a day trader or a swing trader or a position trader or an investor one thing that is required is a trading account with a good online stock brokerage firm. In India you have lot of brokerages that offer online trading account and you need to evaluate them properly before opening an account with them. Following are some of the critical points which you need to look into before shortlisting.
If you are new to trading or investing and depend on recommendation services, invest in IPO and want to manage all your portfolio(stocks, bonds, IPO, insurance etc) in a single account then you need to go for full service brokerage account. Some of full service online brokerage firms in India are ICICI Direct, Angel Broking, Sharekhan etc. Nothing comes for free and usually full service brokerages charge higher brokerage. If you are a full time trader or do your own research before investing then such brokerage firms can be little expensive. In such cases its better to go with discount brokerages who don’t give any recommendation or any other extra services, but give a good trading platform for trade execution and management. One such example for discount brokerage in India is Zerodha.
One suggestion is to have two accounts one with full service broker and other with discount broker and manage your portfolios between these two accounts. You can use full service broker for investments and discount broker for trading.This helps in tax calculation also while you are filing the returns
On May 16, 2014 Indian General Election results would be out and let us say it is not as per expectation or exceeds expectation of the market participants. Market reacts with a huge sell off or rally and now you need to either close off your loss making positions or book profit or you need to make a fresh entry into the market. You log in to your online trading account and you realize its very slow or not able to place the trade or worst not able to log in at all. This is one of the most frustrating and loss making event for a trader and I have experienced this many times.
One of the most critical aspect of evaluating an online stock brokerage firm is the performance of their trading website during peak traffic conditions.If you are a day trader then trade execution speed is absolutely critical and you don’t want any delay here, especially when you are trying to catch some explosive moves.. So you need to make sure that performance of the trading website is consistent and good and doesn't slow down during high volume day, F&O expiry day, during opening when volume is very high and during any time when the volume of trading spikes in the exchanges. The cost of unreliable trading website is very high and you need to read lot of online reviews about your broker before opening the trading account with them
Cost of order execution includes brokerage charges and various government taxes like STT, ST etc. You can’t do anything regarding government taxes as they are fixed but can use your negotiation skills with your broker to get a good deal as far as brokerage is concerned. Many of the full service brokers offer discount if you negotiate while opening the account and make sure you do this and get a bargain , as any cost saved here would go directly into your profit or reduce your loss. For any aggressive high volume trader even a small discount matters a lot. Also note that cheap is not always best. If a brokerage firm offers cheap brokerage but if the website performance is bad or has pathetic order execution then the losses you incur due to poor service would be way above the cost saved due to low brokerage. For an aggressive trader who trades frequently and does his own research discount brokerage is the best suited as they charge low brokerage.
Eventhough web application is sufficient for most of the trading requirement, its better to have an option of using desktop platform for better trade execution and control. Day traders and aggressive traders need desktop platform for their trade execution and management as it gives more options, speed and control. Web application fulfils basic requirements, but for advanced features and automated execution you need have a desktop trading application. Also most of these desktop trading application comes with excellent charting tools which helps in doing technical analysis. Now with advance in web technologies this gap is coming down, but nothing beats desktop app for a day trader.
Any features that would help a trader in execution, analysis and order management would give an edge and any edge is welcome for a trader. Make sure your broker has features that supports various complex options strategies, bracket orders, charting software for technical analysis, real time portfolio tracking, news feed etc.
This is one area where many Indian stock brokerage firms need to focus more and this is a must have feature for any trader. Its really silly for any stock brokerage firms to expect that aggressive high volume traders open their trading account with them but they don’t have an advanced charting tool for technical analysis. If you are a trader , then make sure that your broker provides an excellent charting tool with important technical indicators with real time price data.
Eventhough you trade online most of the time, you always need an option to trade by calling your broker once in a while. There would be lot of situations in a trader's life when he has open positions but no access to net , especially in country like India, then he need to have an option of calling his broker and placing the trade without much delay.
Having good customer support is very important.Many times traders and investors would be in a situation where they need to call the customer support helpline to get their queries answered immediately. I have many times faced problems like account getting locked due to wrong password, desktop trading application issues, open positions not getting reflected properly etc. Such situations happen more frequently than what we think. Bad customer support is unacceptable and always go for a stock broker who has good customer support
Now a days people are on move constantly and most of then own a smartphone. So you need to have a broker who has mobile trading apps for important mobile OS. This would help you to instantly trade even when you are busy with your day job or some other activities.
You need to be able to easily pull and push cash from your trading account without much hassles. Even if all these accounts are not from same company, you need to have the ability to do these activities with minimal delay.This factor is nice to have, but can’t be an only reason for deciding not to open an account with any particular brokerage firm.
The following blog article contains review of some of the online stock brokers in India like ICICIDirect.com, Sharekhan.com, Angelbroking.com and Zerodha.com by a trader who used their service for trading and investing. The trader has more than decade long experience trading in Indian stock market and reviews are based solely on his personal experience