Costs, Taxes & Slippage

In one line: Every trade has hidden fees, so plan for them or they will slowly eat your profits.

🎯 What you'll learn

Think of a busy bazaar (market). To buy and sell there, small fees are added on top. In the stock market it is the same.

Brokerage (also called commission) — the fee your broker (the company that places your trade) charges. It can be a flat amount or a percentage.
Exchange and regulatory fees — small charges from the market and the rule-makers. In India the market rule-maker is SEBI.
STT (Securities Transaction Tax) — a small tax on the value of the trade.
GST (Goods and Services Tax) — a tax added on top of the brokerage and some fees.
Stamp duty — a small government charge when you buy.
DP charges — a small fee when shares leave your Demat account (the online locker that holds your shares).
Each fee is tiny. Together they add up. Exact rates change over time, so always check the current ones.

The spread is the gap between the bid (the highest price a buyer will pay) and the ask (the lowest price a seller will accept).

You usually buy at the higher ask price and sell at the lower bid price.
That gap is a cost you pay without seeing it as a "fee".
Big, popular stocks have a small spread. Small, quiet stocks have a wide spread, so they cost more to trade.

Slippage is when your order fills (completes) at a slightly worse price than you expected.

It happens most in fast-moving markets, or in illiquid stocks (ones with few buyers and sellers).
Like booking a cab in heavy rain: the price you pay is a bit higher than the price you first saw.
Using a limit order (an order with a fixed maximum price) helps you avoid ugly slippage.

When you sell for a profit, you may owe tax on that gain.

Short-term gain — you held the stock for a short time. This is usually taxed at a higher rate.
Long-term gain — you held it longer. This is often taxed at a lower rate.
So holding longer can mean less tax. Frequent trading usually means more tax and more fees.
Keep good records of every buy and sell. A tax professional can help you get it right.

Ravi buys shares worth ₹10,000 and sells them the same week for ₹10,300. That looks like a ₹300 profit.

His true profit is ₹225, not ₹300. Costs took a quarter of it.
If Ravi made 20 quick trades like this a month, those ₹75 costs repeat 20 times. That is ₹1,500 gone in fees alone.

Looking only at the price change and forgetting the fees.
Over-trading (buying and selling too often) — every trade adds fresh costs.
Trading illiquid stocks and getting hit by wide spreads and slippage.
Ignoring tax until year-end, then having no records.
Taking a 1:1.2 reward trade — after costs, the small edge can vanish, so the reward may not be worth the risk.

Q: What is slippage? A: Getting your order filled at a slightly worse price than you expected, common in fast or illiquid markets.
Q: Why does frequent trading hurt returns? A: Because each trade adds costs and often higher short-term tax, and these pile up quickly.
Q: Where should costs fit in your plan? A: Inside your risk-reward check, before you enter, so a small edge is not wiped out by fees.

Brokerage / Commission — the fee your broker charges to place a trade.
STT (Securities Transaction Tax) — a small tax on the value of a trade.
DP charges — a small fee when shares leave your Demat account.
Demat account — the online locker that holds your shares.
Spread — the gap between the bid (buyer's price) and ask (seller's price).
Slippage — filling at a worse price than expected.
Illiquid — a stock with few buyers and sellers, so it is harder to trade.
Limit order — an order with a fixed maximum (or minimum) price.
Short-term / Long-term gain — profit from holding a stock a short or long time, taxed differently.

Educational content only — not financial advice. Trading involves the risk of losing money.