Guide to a Trading Account
Most people associate investments with a demat account, but there’s a huge difference between that and a trading account. While the former allows you to hold all your shares and securities in one place, it doesn’t have the option to initiate trades by buying or selling. That responsibility is entrusted to a trading account.
What is a Trading Account?
Just as you need a demat account to dematerialize physical shares into an electronic format, you also need a trading account to trade stocks in the market. Your holdings can include securities, cash, and many other assets, which you can buy and sell as often as you like, even in a single session, after you open a trading account online.
When investing in the stock market, you know that when it comes to returns, it's all about timing. It's essential to be able to trade shares at opportune times, which is why a trading account becomes necessary.
Trading Account Benefits
A trading account lets you transact an array of securities, from futures and options to mutual funds and ETFs. There are multiple benefits of the tool, which we explain in detail below.
- Convenience and Speed Trading accounts are tech-savvy. They assist in making your transactions seamless and speedy. Not only can you buy and sell at the click of a button, but you can also compare numbers between the present and previous years to track progress and plan your investments well.
- Goldmine of Data In order to open a trading account, you'll have to reach out to one of the many stockbroking firms. These companies offer their own online trading platforms that contain a lot of valuable data, such as research reports. This knowledge goes a really long way in letting you plan investment strategies and improve your returns.
- Consolidated Access Having a trading account in India provides you with access to the most popular stock exchanges, from the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) to Multi Commodity Exchange (MCX) and National Commodity and Derivatives Exchange (NCDEX), all on one platform.
- Customized Transactions On a trading account online, you receive support from trained professionals who are informed, experienced, and work for your best interests. Most of them provide their services 24/7, whether it’s a technical issue coming in the way of your trades or some other issue. You can also customize your transactions by setting up alerts for target shares.
How Does a Trading Account Work?
The functions of a trading account aren’t limited to helping you trade commodities, stocks, and other securities. Traders can use it to speculate about the market and plan their investments with the expectation of profit. A trading account is popularly used for day trading, saving for retirement, making long-term investments, and so on.
Here’s how the account works:
When a trader wishes to buy and sell shares, they open a trading account and start placing purchase or sale orders. This order is processed through the relevant stock exchange, and once accepted, the number of shares bought or sold get credited to or debited from your demat account. Accordingly, a proportionate price gets deducted or added to your bank account. It’s simple, quick, and highly convenient.
Also Read: How to Choose the Best Demat Account
How Do You Open a Trading Account Online in India?
Opening a trading account online in India is easier than ever before. Here are 4 steps you will have to follow before you start trading securities and commodities:
- The first step is to pick a reliable broker who will provide you with timely support. This is one of the essential trading account features. To make a sound decision, start by comparing different brokers and their brokerage fees, which they charge to undertake your orders. When you open an online trading account, a lot of brokers offer attractive discounts that you can avail of.
- Brokers tend to have their own procedures for opening a trading account. Once you’ve selected your brokerage firm, you can ask them about the exact process and further steps to follow.
- Typically, the firm will send a representative to your home with two forms: one for opening the account and the other for KYC (Know Your Customer). Fill them up and produce all the relevant documents, including proof of income, address proof, identity proof, and so on.
- Your forms will be processed by the broker, after which they will ask you to verify a few personal details either in person or over the phone. If everything appears in order, your application will be accepted, and you will be given a unique trading ID. With this, you can start conducting trades.
These are just the basics of a trading account that will help you understand its necessity and prevalence, especially in the digital age. It’s a useful tool for wealth creation and something that every investor needs to own. You can open a trading account in India from the comfort of your home by selecting the broker of your choice.
Share Market Knowledge Centre
- Demat account
- Share market
- Trading account
- Online share trading
- Intraday trading
- Futures trading
- Commodities trading
- Currency trading
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Frequently Asked Questions
A trading account in India can be used in multiple ways depending on the services provided by the broker. Typically, you will be able to create wealth, plan for retirement, keep track of tax returns, buy insurance, and gain access to expert advice about the right investments. Other trading account features include margin trading, which allows you to buy stocks at marginal amounts by leveraging cash.
Important trading account benefits include speedy and convenient transactions, access to different stock exchanges in one place, the availability of knowledge about the market consolidated by experts, the ability to customize the trades while keeping track of your progress, and the power to plan your investments and improve results.
A trading account helps you facilitate the purchase or sale of equity shares and other types of securities in the stock market. It acts as a mediator between your demat and bank account. Shares get debited from and credited to your demat account once an order is placed, and the sum gets deducted or added to your bank account after the transaction is complete.