Trading Account – Overview, Types, How to Open a Trading Account
All investors and traders in the stock market are well versed in the term trading account. For those unaware, a trading account is a primary account of day traders, allowing them to trade, buy or sell equity shares and stocks in the market.
Technological advancement has shifted the stock exchange from an old system to digital transactions. So, all traders in the stock market are now required to have a trading account to smoothly trade with the help of an authorized stock market broker.
Trading Account – Explained!
Anyone with stocks who wants to trade in the market must have a trading account. As mentioned, a trading account is a day trader’s primary account to carry out the trade, sell and buy stocks in the market. It is needed when dealing in securities. It allows traders to trade securities and assets securely and invest in stock markets.
Before the digital revolution, traders and investors were trading with an old system requiring hand gestures and verbal communication. With the advancement in internet technology, things have changed, and trading has become a breeze.
Difference Between Trading and Demat Account
A trading account is the day trader’s primary account for trading, selling, and buying securities and assets. In contrast, a Demat account only allows storing the bonds, shares, ETFs, and stocks digitally.
A trading account only displays the total number of transactions whereas Demat shows the complete ownership of securities and shares.
Investors and traders use their trading accounts as the medium to access their bank and Demat account. A trading account allows easy trading and buying of shares, and the transaction is processed in the stock exchange.
After successful transitions, the Demat account will be credited with shares purchased, and the value gets deducted from the trader’s bank account. You have to reverse the process when you want to sell the shares. Sellers must select the number of shares they want to sell and sell them via a trading account. After successful transactions in the stock exchange, the shares get deducted from the trader’s Demat account and the amount gets credited to a bank account.
What are the Types of Trading Accounts?
Traders and investors must choose from the two types of trading accounts per their needs.
- Standard Trading Account – This type of securities trading account allows trading in mutual funds, EFT, equity, currency futures, and intraday trading. It is the best account for trading for short-term investors as it allows investing in different funds instantly and frequently.
- Commodity Trading Account – Anyone who wants to trade in commodities like copper, silver, gold, crude oil, and more must have a commodity trading account. They need to open the account with the help of a commodity broker, who will guide and help them to use the trading account for commodity trading. The trading account is not linked to your Demat Account.
What are the Benefits of a Trading Account?
You must open a trading account if you plan to trade in stock markets. Here are the benefits of opening a trading account for trading.
- A trading account will help streamline and bring all investments into one platform, making all exchanges accessible from one trading account. It helps in making trading smooth, faster, and fuss-free.
- The digital trading platforms respect all users and offer 24/7 assistance and guidance. So, having a trading account for online trading gives you access to an expert team 24/7 for guidance and inquiries. Based on investment behavior, the platform also sends push notifications.
- Because all transactions are performed digitally, the accounts are well-organized and easy to manage. You are not required to be present for trading; you can do it right from the confines of your house.
How to Open a Trading Account?
As mentioned, trading in securities demands a trading account, without which it won’t be possible to trade in the stock market. But, along with a trading account, you also need a Demat Account.
To open trading, investors and traders must have proof of address, identity, and income certificate. After you gather all these documents, contact a stock market broker based on your investment portfolio.
You must consider hiring experts in the field who value your money and time and promptly reply to your queries. After opening a trading account, you need to find a user-friendly and smooth platform for trading. Fill out the KYC form to successfully open a Demat Account. It can be done both offline and online.
Data verification will be carried out, and a documentation process will start after it is over. After verification, the trading account details will be mailed to you, and you can start trading in securities.
Online trading is only possible with a trading account. It is crucial for every online trading as it links your Demat and bank account. With a trading account, one can carry out online trading from the comfort of their house.
All-day traders involved in selling and buying equities must open a trading account. It offers them safe and smooth online transaction experiences and allows investing in the stock market and shares smoothly.