Zero is not where you start.

Four layers, and where each one lands

This chapter has built a stack, and it is worth seeing it as one thing.

Charges (01.09.01) are on both legs, disclosed on the contract note, part percentage and part flat. Spread (01.09.02) is on both legs, on no document, and is the price of immediacy. Impact cost (01.09.03) is on both legs, published by the exchange, and matters only when your order is large relative to the book. Tax (01.09.04) is different in kind: it is charged on the profit, not on the trade, so it arrives only if you succeed.

The first three are paid whatever happens. That is the important distinction. You pay three of these four for being wrong as well as for being right.

Read what the arithmetic is actually saying

₹79 does not sound like much, and that is the trap in it. As a percentage of a ₹5,000 position it is 1.59%, and that figure has to be compared against the return you expect rather than against your bank balance.

If you hope to make 10% on the trade, you have given up roughly a sixth of it before starting. If you are trading for a 2% move, you have given up most of it — and you will be right about direction more than half the time and still lose money.

Now scale the same trade. Put ₹1,00,000 into the same share and the flat components stop mattering: brokerage and the depository charge together fall from 1.1% of the trade to about 0.06%, and the total comes to roughly 0.39%. The identical strategy has become four times cheaper without becoming cleverer — and notice what is left at that size. The spread is now the single largest line, because it is a percentage and never stops scaling.

That is the single most useful thing in the chapter. Cost is not a property of the trade. It is a property of the trade's size, frequency and urgency — all three of which you control.

You will be right about direction more often than you are right about direction by enough.

Build your own, in ten minutes

Do not use the numbers above. They are an illustration at one broker's rates on one date. Build yours.

One. Make one real trade, or take the last one you made, and open the contract note. Add every charge line and divide by the trade value. That is your charge percentage on one leg.

Two. Compare the price on screen when you pressed the button with your average fill price. That difference, as a percentage, is your spread and slippage together on that order.

Three. Double both, because you will sell one day. Add the depository charge for the sell leg, which is flat and therefore matters more the smaller you are.

Four. Write the total down as a percentage and keep it somewhere you will see it. That is your break-even: the rise at which you have made nothing.

Recompute it when you change broker, when the budget changes a rate, or when you start dealing in noticeably larger or smaller amounts. It will not move often.

What the number is for, and what it is not for

It is for comparing. A strategy expecting 3% a trade and a strategy expecting 30% a year are affected by this number to wildly different degrees, and the comparison is impossible until you have computed it once.

It is for sizing. A position too small to carry its own flat fees is a position that needs an unusually good outcome to be worth having made.

It is not an argument for never trading. Costs avoided by inaction are not profits earned, and Part 21 will show you that the most expensive mistakes in this book have nothing to do with brokerage.

And it is not a reason to choose a broker on price alone. A broker that is twenty rupees cheaper and occasionally cannot execute is more expensive than the arithmetic here can express.