The stock markets have found wide acceptance among the people in past two decades.The introduction of technology has made trading in stocks simpler. Earlier, the stocks were in the form of share certificates. After dematerialisation, the stocks are held in electronic form in the trading and demat account of the investors.
Let us understand the meaning of trading account
Meaning of Trading Account
A trading account is an intermediary between the investor’s bank and his demat account. The trading accountis used purchases and sells the shares of the investor held in demat account. In simple terms, the demat account acts as the bank saving account that stores the stock purchases of the investors. On the other hand, the trading account is like bank’s current account that enables the stock purchases.
How Trading Account Works?
The trading account is similar to a demat or a bank account. The trader just needs to transfer the funds from the bank to the trading account. When a trader purchases shares, money is transferred from his bank to his trading account. Upon selling the shares, the money is automatically transferred from his trading account to his bank account. Therefore, linking of the bank account and trading account is compulsory in case of trading.
Difference BetweenTrading Account and Demat Account
Trading account is different from Demat account. The main difference between the two is, in case of trading account, the trader can trade only in futures and options, and currency. On the other hand, if the trader wants to trade in different stocks, then he will require demat as well as trading account.
Let us under the functioning of a trading account with the help of an example.
Example of Trading Account
Suppose an investor purchases one lot of Reliance Industries in futures in his trading account. In this scenario, the amount that needs to be paid to the broker will get transferred from his bank account to the trading account. On selling the future lot, the amount that will be refunded by the broker to the trader. The moneywill be transferred automatically from his trading account to the bank.
Features and Benefits of Trading Account
Opening a trading account provides multiple advantages. Let us see few of them.
- Trading account is very easy to operate and it offers online and telephonic access.
- It reflects the efficiency and effectiveness of a trader’s market activities.
- It allows shares and other assets to be held in electronic form. This in turn means, you are no more required to hold physical shares and securities.
- Trading account allows automatic settlement of funds by either debiting or crediting the same from your account.
- It allows you to trade in a variety of instruments like Forex, Derivatives, ETFs, gold, oil, etc.
- It is of great help to beginners, as it allows them to set their own personal trading limit.
- Trading account reflects the relationship between cost of goods sold and gross profits/gross losses. This helps the trader to measure his profitability and make buying or selling decisions.
How to Open a Trading Account?
To open a trading account, the trader needs to submit the following documents with the broker.
- PAN Card
- Identity Proof
- Residence Proof
- For trading in futures and option, the trader needs to submit bank statements of last 6 months
How to Select the Best Trading Account in India?
We have seen the benefits of trading account, but it is extremely important to select the right trading account to reap those benefits. Here are few things to keep in mind while selecting the trading account in India.
- Select a reliable trading platform which provides affordable and quality services.
- Look for a one stop solution, which means, select a service provider that offers everything under one roof. It should provide complete and comprehensive solution to meet various trading needs.
- The prices of securities fluctuate every second during market hours. Therefore, your trading account should also be technologically advanced in order to provide quick access anytime and anywhere. Select the account which ensures nil downtime and quick services.
- Always consider long tern requirement before selecting the trading account.
Also Read: What are stock market indices?
Indira Securities – Best Trading Account Service Provider in India
Indira Securities is a leading Stock brokerage firm. We are SEBI registered. We offer trading account at affordable cost. Our team works 24*7 to serve all your trading needs. We provide financial services to the clients for trading and investing in stock markets. We ensure that our clients make good returns with our stocks recommendation. We recommend stocks to our clients on the basis of technical and fundamental analysis of stocks. Our brokerage rates are very affordable. Our mobile app makes the trading experience hassle free. Associate with us and make high returns. For opening a trading and demat account or for any further information you can reach us via call or email.