WARNING: This is a very lengthy post.
For some time I have been visiting this forum, mainly to see some trading strategies of fellow traders. Lately I was in search for a new Demat Account(I have been using mainly Kotak and HDFC so far) I visited this section dealing with "Demat and Broker" threads to get a feel on other people view on various Demat service providors.
Many of queries mentioned in this forum section i observed were repetitive in nature and many threads go off topic and end without any logical conclusion.
Comparision's are definately advisable to seek a relative view point. But they need to be healthy and serve some definate purpose. Do compare "India Bulls" with "ShareKhan". But be clear on your objectives and purpose before you start the thread. As Einstein said "Everything is relative"
My thread is more targeted towards new entrants in the market and also to streamline a few often asked queries.
Let me attempt to crystallize a few things which I feel are correct when evaluating brokers. Of course these are my views and you are free to disagree with any or all of them. I have taken artistic liberty in omitting certain things in attempt not to confuse newbies with data overload. Although I have mentioned my preference in few instances, I would advice you to heed your own discretion and judgment when selecting your broker. Please note that this thread is not to be considered as a field for judging which broker is best!
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1. Foremost, understand that these 5 parameters are separate entities in their own right. This are namely A) Brokerage & Misc charges B) Quote Software C) Execution Platform (D) Demat Account, and finally (E) Back office Support. Dont confuse or club them together. Let me now explain each in brief.
(A) Brokerage & Misc charges: This accounts for all the charges that you incur for your trading/investing. Please do try and account for every expense you might incur for your trading (including internet usage charges). A few example would be: Demat Account maintainance, Brokerage, Annual account Fee, Telephone based trading charges, trading software usage charges, etc. Understand what all charges you are bound to incur from your broker.
(B) Quote Software: Used mainly for technical study and for live quotes. Many people dont evaluate quote software. They typically use software that he or she has stumbled upon and stick with it just because they have eventually grown comfortable using it. They dont pay attention to the quality of data (how accurate it is). Or how fast and often it refreshes. Does it allow you to back test your strategy? Does it allow you to customize technical signals/parameters? Does it allow you to add new indicators? Does it allow you to see historic data? for what period is intra day data available. You might need all. But atleast be clear on what you need and ensure your quote software provides it.
Before people jump on my neck, let me clarify that a newbie wont necessarily need all this features now it self .. But dont start your trading career with bad habits. Take efforts to evaluate quote software. Good quote software is not free. They are costly. Best I have seen on Indian markets is esignal (www.esignal.com). I strongly urge newbies to avoid investing in any software until they are comfortable with doing Technical analysis from free web based online charting services. Once you have graduated to some level of expertise you can consider quality software like esignal.
(C) Execution Platform: Any platform that allows you to execute your trade fast. It should automate trade management and execution. Automatic protection against human errors. Consider for example "Ninja Trader". This software actually can store your trading style (like having a 10 point stop loss on index futures) and can auto apply it (of course you have to set it initially). It can also auto sell when it detects that your first level target is reached. No room for making emotional error's! and many such nice features that take room out of making human emotional errors.
Unfortunately Indian brokers dont have any candidates in this category. Best bet for you is to choose a platform which executes FAST. Fills your request in seconds.
(D) Demat Account: Open a Demat account with a well known establishment like NSDL, ICICI or HDFC. Although some broker offer free demat account, or offer a free zero balance saving bank account with a annual fee for a demat account. But NSDL and few other will charge you for a demat account. NSDL is promoted by UTI, IDBI and National Stock Exchange. https://nsdl.co.in
(E) Back office Support: Many of us have faced issues with back office support with our broker. RM trading without your knowledge, Funds not being transferred, Trades not being executed, etc are a few examples. Slow execution. Charges you for dial-in trade are a few others.
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2. Know your style: Are you an investor or a trader or a swing trader? YES SIR.... you will be surprised to know that each kind has his /her specific needs.
Based on your style you need to choose from above 5 parameters as to which are important to your style of execution and select appropriate broker.
Lets take an example. If you are an investor, the most valuable parameters for you will be "D" i.e. Demat account. Open a Demat with good bank like ICICI or HDFC or NSDL. You can check EOD charts from internet you need not worry about execution platform, Back office support. You can very well trade from Web interface. Slightly higher brokerage charges can also be forgiven
If you are a Swing trader, the most valuable parameter will be ("A & E") i.e.; Brokerage charges and Back office Support. Execution platform and Demat account may be given some concession. I know some people must be wondering why discount quote software? .... Now a days we have lot many free online web based charting services are available which allow you to analyze EOD data (example www.icharts.in). This also includes various technical studies.
If you are a day trader, the most valuable parameter for you would be all (and maybe a few more) except maybe Demat. You cant rely on web based online charting. You need lower brokerage charges. You need faster data feeds which are also accurate. You need faster execution. You need fast access and response from broker back office.
On this forum I once read a thread in traderji.com of people discussing annual charges for trading platform software. It sounded ridiculous to me that members discussing on this thread simply compared various vendors trading software charges WITHOUT discussing other parameters like accuracy of data, speed of refresh, features for technical studies, etc.
What will you rather have (1)"A software that is not 100% accurate, not flexible but is very cheap .. Only Rs.500/Month" OR (2) "A software that has accurate data, fast feeds and flexible to do your own studies and back test but is very costly Rs.5000/Month". I guess only a minority will opt for second option (Fair for beginners). Simply because why pay thousand for something which you might not use completely. Most of the Indian platforms are developed by Asian CERC or FT Technologies. They all have almost similar look and feel. They are good enough for getting quotes and doing basic technical studies. But none of them allow you to do advanced things like creating your own indicators, back testing, paper trade, Different type of alerts, etc.
----------------------------------------------------------------------------------
3. Dont include "Broker provided tips" as a deciding factor during evaluation. I separately mention this point as an educated good friend of mine zeroed in on a broker purely because the "broker provided calls/tips" were profitable in past. He is however happy with the broker to-date. But then he is an "occasional Swing trader". Just because your broker gives good "tips" does not qualify him to be competent in above parameters.
----------------------------------------------------------------------------------
4. None of the brokerage firm's will score perfect on ALL factors. Accept this. Even different location office/branch (of same broker) may vary in above parameters (if compared in different locations).
A brokerage firm giving great back office support in a suburb of Mumbai might have a bad support structure in Delhi! A broker office in suburb might offer you lower brokerage than your next door broker. ICICI might not be good choice for day trading but is great for an investments oriented senior citizen who was offered free trading+ saving accounts in ICICI.
Another mistake many people do is to simply open account to a broker nearest to them. In some cases it is acceptable (like say for investors, swing traders or those who wish to trade from brokers office). But might not be a good choice if you wish to trade from ur own computer or say from your home.
In short go through this thread and then checkout whats best that offers what suits your trading style. Prepare a XL sheet with all the parameters in order of importance. Choose the broker which score maximum. In case of a TIE, select the one nearest to you. But also as a precaution take online opinion from different users of same broker ...to avoid nasty surprises.
----------------------------------------------------------------------------------
5. Brokers are there to earn money. Any way they can. Its your duty to protect your interest. Believe in God, but lock your car.
I hope I was able to make some sense of this thread. Purpose of this thread was not to direct you to ways of evaluating brokers. But rather to streamline thought process when selecting a broker.
Please consider that these are my personal views and give it a considerate thought before you respond so as to make this a healthy discussion.
Stumper
For some time I have been visiting this forum, mainly to see some trading strategies of fellow traders. Lately I was in search for a new Demat Account(I have been using mainly Kotak and HDFC so far) I visited this section dealing with "Demat and Broker" threads to get a feel on other people view on various Demat service providors.
Many of queries mentioned in this forum section i observed were repetitive in nature and many threads go off topic and end without any logical conclusion.
Comparision's are definately advisable to seek a relative view point. But they need to be healthy and serve some definate purpose. Do compare "India Bulls" with "ShareKhan". But be clear on your objectives and purpose before you start the thread. As Einstein said "Everything is relative"
My thread is more targeted towards new entrants in the market and also to streamline a few often asked queries.
Let me attempt to crystallize a few things which I feel are correct when evaluating brokers. Of course these are my views and you are free to disagree with any or all of them. I have taken artistic liberty in omitting certain things in attempt not to confuse newbies with data overload. Although I have mentioned my preference in few instances, I would advice you to heed your own discretion and judgment when selecting your broker. Please note that this thread is not to be considered as a field for judging which broker is best!
-------------------------------------------------------------------------------
1. Foremost, understand that these 5 parameters are separate entities in their own right. This are namely A) Brokerage & Misc charges B) Quote Software C) Execution Platform (D) Demat Account, and finally (E) Back office Support. Dont confuse or club them together. Let me now explain each in brief.
(A) Brokerage & Misc charges: This accounts for all the charges that you incur for your trading/investing. Please do try and account for every expense you might incur for your trading (including internet usage charges). A few example would be: Demat Account maintainance, Brokerage, Annual account Fee, Telephone based trading charges, trading software usage charges, etc. Understand what all charges you are bound to incur from your broker.
(B) Quote Software: Used mainly for technical study and for live quotes. Many people dont evaluate quote software. They typically use software that he or she has stumbled upon and stick with it just because they have eventually grown comfortable using it. They dont pay attention to the quality of data (how accurate it is). Or how fast and often it refreshes. Does it allow you to back test your strategy? Does it allow you to customize technical signals/parameters? Does it allow you to add new indicators? Does it allow you to see historic data? for what period is intra day data available. You might need all. But atleast be clear on what you need and ensure your quote software provides it.
Before people jump on my neck, let me clarify that a newbie wont necessarily need all this features now it self .. But dont start your trading career with bad habits. Take efforts to evaluate quote software. Good quote software is not free. They are costly. Best I have seen on Indian markets is esignal (www.esignal.com). I strongly urge newbies to avoid investing in any software until they are comfortable with doing Technical analysis from free web based online charting services. Once you have graduated to some level of expertise you can consider quality software like esignal.
(C) Execution Platform: Any platform that allows you to execute your trade fast. It should automate trade management and execution. Automatic protection against human errors. Consider for example "Ninja Trader". This software actually can store your trading style (like having a 10 point stop loss on index futures) and can auto apply it (of course you have to set it initially). It can also auto sell when it detects that your first level target is reached. No room for making emotional error's! and many such nice features that take room out of making human emotional errors.
Unfortunately Indian brokers dont have any candidates in this category. Best bet for you is to choose a platform which executes FAST. Fills your request in seconds.
(D) Demat Account: Open a Demat account with a well known establishment like NSDL, ICICI or HDFC. Although some broker offer free demat account, or offer a free zero balance saving bank account with a annual fee for a demat account. But NSDL and few other will charge you for a demat account. NSDL is promoted by UTI, IDBI and National Stock Exchange. https://nsdl.co.in
(E) Back office Support: Many of us have faced issues with back office support with our broker. RM trading without your knowledge, Funds not being transferred, Trades not being executed, etc are a few examples. Slow execution. Charges you for dial-in trade are a few others.
----------------------------------------------------------------------------------
2. Know your style: Are you an investor or a trader or a swing trader? YES SIR.... you will be surprised to know that each kind has his /her specific needs.
Based on your style you need to choose from above 5 parameters as to which are important to your style of execution and select appropriate broker.
Lets take an example. If you are an investor, the most valuable parameters for you will be "D" i.e. Demat account. Open a Demat with good bank like ICICI or HDFC or NSDL. You can check EOD charts from internet you need not worry about execution platform, Back office support. You can very well trade from Web interface. Slightly higher brokerage charges can also be forgiven
If you are a Swing trader, the most valuable parameter will be ("A & E") i.e.; Brokerage charges and Back office Support. Execution platform and Demat account may be given some concession. I know some people must be wondering why discount quote software? .... Now a days we have lot many free online web based charting services are available which allow you to analyze EOD data (example www.icharts.in). This also includes various technical studies.
If you are a day trader, the most valuable parameter for you would be all (and maybe a few more) except maybe Demat. You cant rely on web based online charting. You need lower brokerage charges. You need faster data feeds which are also accurate. You need faster execution. You need fast access and response from broker back office.
On this forum I once read a thread in traderji.com of people discussing annual charges for trading platform software. It sounded ridiculous to me that members discussing on this thread simply compared various vendors trading software charges WITHOUT discussing other parameters like accuracy of data, speed of refresh, features for technical studies, etc.
What will you rather have (1)"A software that is not 100% accurate, not flexible but is very cheap .. Only Rs.500/Month" OR (2) "A software that has accurate data, fast feeds and flexible to do your own studies and back test but is very costly Rs.5000/Month". I guess only a minority will opt for second option (Fair for beginners). Simply because why pay thousand for something which you might not use completely. Most of the Indian platforms are developed by Asian CERC or FT Technologies. They all have almost similar look and feel. They are good enough for getting quotes and doing basic technical studies. But none of them allow you to do advanced things like creating your own indicators, back testing, paper trade, Different type of alerts, etc.
----------------------------------------------------------------------------------
3. Dont include "Broker provided tips" as a deciding factor during evaluation. I separately mention this point as an educated good friend of mine zeroed in on a broker purely because the "broker provided calls/tips" were profitable in past. He is however happy with the broker to-date. But then he is an "occasional Swing trader". Just because your broker gives good "tips" does not qualify him to be competent in above parameters.
----------------------------------------------------------------------------------
4. None of the brokerage firm's will score perfect on ALL factors. Accept this. Even different location office/branch (of same broker) may vary in above parameters (if compared in different locations).
A brokerage firm giving great back office support in a suburb of Mumbai might have a bad support structure in Delhi! A broker office in suburb might offer you lower brokerage than your next door broker. ICICI might not be good choice for day trading but is great for an investments oriented senior citizen who was offered free trading+ saving accounts in ICICI.
Another mistake many people do is to simply open account to a broker nearest to them. In some cases it is acceptable (like say for investors, swing traders or those who wish to trade from brokers office). But might not be a good choice if you wish to trade from ur own computer or say from your home.
In short go through this thread and then checkout whats best that offers what suits your trading style. Prepare a XL sheet with all the parameters in order of importance. Choose the broker which score maximum. In case of a TIE, select the one nearest to you. But also as a precaution take online opinion from different users of same broker ...to avoid nasty surprises.
----------------------------------------------------------------------------------
5. Brokers are there to earn money. Any way they can. Its your duty to protect your interest. Believe in God, but lock your car.
I hope I was able to make some sense of this thread. Purpose of this thread was not to direct you to ways of evaluating brokers. But rather to streamline thought process when selecting a broker.
Please consider that these are my personal views and give it a considerate thought before you respond so as to make this a healthy discussion.
Stumper
