What Is Commodity Brokerage and How Do You Calculate It

With the increasing popularity of trading over the stock market, shares are not the only option that people consider. With various options like forex and commodities also worth considering for investment, you need to understand clearly what aspects you will have to consider while investing in them and how you are going to be charged for it. In this article, we will be specially focusing on what commodity brokerage is and how it is calculated.

What Is Commodity Brokerage:

Just like there are a few people in between who charge you a certain amount of money to do a certain work for you, same is the case when you trade in commodity exchange in India. As per the SEBI rules in India, you cannot trade in the stock market directly and therefore you need to have an agent or a firm in between that is legally licensed to become the middle firm that allows people to trade through them in the commodities. As a result of this, the customers will have to get their accounts opened for commodity trading with these broking firms. As fees, these companies are going to charge you certain amount of money on every trade request (both buying and selling commodities). This amount of money is known as the commodity brokerage charged in the commodity markets.

Different broking firms would charge your different brokerages when you trade through them in the Indian MCX. They consider different factors to decide on what charges they will levy on you. For instance, the frequency of your trade requests, the quantity of commodity you are trading in, the type of commodity, the way you will be making payments, etc. are some of the common aspects that are brought into consideration by these c companies to decide on what they are going to charge you.

A simple way that you can use for calculating the commodity brokerage is through using the commodity calculators. Different broking firms have different commodity calculators that they have installed on their websites as per what they generally charge. Apart from these personalised commodity brokerage calculators, there are various other calculators that are designed generally that you can use. When you go to use this calculator, you’d be asked to fill in certain details that are required to identify the right rates and amount of brokerage. Brokerage percentage, type of commodity you are investing in, buying and selling rates, quantity of your purchase which is also known as the lot size, etc are some common aspects that you would need across all the calculators.

Apart from the calculators that you use online, there is a few which you can download as well. These calculators can be downloaded in the form of general word or excel files which makes using them even easier. For all those people who believe that using the brokerage calculators can be difficult and you should leave all these to the professionals only, it is important to understand that these calculators are made available in the simplest way possible thus making the process easy and customer friendly.

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