Trading Account

A trading account is an investment account for transacting in securities. You can buy or sell assets frequently through your trading account. It helps you speculate trades by monitoring the movements of your assets. It is an essential tool to seamlessly invest in stock markets while making the process convenient and secure.
Previously, the open outcry system involving hand signals and verbal communication was used for trading in the stock markets. Traders had to convey their buying or selling decisions through this system. Upon adoption of electronic systems in the stock markets the open outcry system became obsoleteInstead, you can open a trading account with a registered stock market broker and authorize them to conduct trading on your behalf.
Your trading account acts as an investment account to holds your securities and other holdings. You can use it to buy and sell assets frequently even within the same trading session. To activate your online trading account, you must register with a stockbroker or a brokerage firm. The broker will issue a unique trading ID for conducting stock market transactions. Different trading accounts come with varied features so you must choose one that meets your trading and investment requirements.
How Does a Trading Account Work?
A trading account links the Demat account and the bank account of an investor. You can place an order to buy shares through your trading account. Your transaction goes for processing in the stock exchange. Upon execution, the allotted number of shares is credited into your Demat account. The proportionate sum payable gets deducted from your bank account.
When you place an order to sell equity shares the process is reversed. You place a sale order for a fixed number of shares from your trading account. The transaction is submitted for processing in the relevant stock exchange. Once the order is executed, the selected number of shares is debited from your Demat account. A proportionate amount gets credited to your bank account.
Types of Trading Accounts
You can select from the following two types of trading accounts
• A securities/standard trading account: A Standard trading account covers all your basic investment requirements. It allows you to trade equity – both intraday and delivery, futures & options (F&O), exchange traded funds (ETFs), and currency futures. Short-term traders can leverage a standard trading account to invest their funds at a high frequency.
• A commodity trading account: You will need a Commodity Trading Account if you plan to trade in commodities such as gold, silver, copper, and crude oil. You must open an account with a commodities broker for this process. A commodities broker is an individual broker or a brokerage firm. They are a trading member of a recognized commodity exchange such as NCDEX or MCX. You can trade commodity futures with your commodity trading account. Therefore, you do not need to link it to your Demat account.
However, an important point to note is that you can open only one trading account with a broker. So, if you need multiple trading accounts you must open them with different brokers.
Advantages of Opening a Trading Account
One-point Access
A trading account eases the wealth creation processes for you by bringing all your investments on a single platform. You get access to multiple exchanges in India and can trade in different securities and commodities. The leading exchanges included in most trading accounts are National Stock Exchange (NSE), and the Bombay Stock Exchange (BSE) for securities. While for commodities there are National Commodity and Derivatives Exchange (NCDEX), and Multi Commodity Exchange (MCX). Your online trading account enables access to all these exchanges in just a click.
Reliable information
Taking the right decision at the right time helps you make the most out of your equity investments. When you open an online trading account the concerned platforms extend some value-added services. These include sharing research reports prepared by experienced and knowledgeable professionals. You can study these reports and make informed investment decisions. This improves your probability of earning higher returns.
Notifications and customization
Most online trading platforms provide customized support to their clients round the clock. You can easily connect with their knowledgeable team for troubleshooting a technical issue or guidance related to the trading platform. Additionally, you can allow them to send push notifications according to your investment priorities. They also alert you through SMS or emails about the buy and sell targets if you opt for the notifications.
Flexibility
After trading platforms have become app-based, it has become easy to access them with the help of laptops, smartphones, and other hand-held devices. Online trading offers the flexibility to keep track of investments from anywhere and at any point in time.
Seamless Transactions
Online trading allows you to seamlessly transfer funds for conducting equity trading. It reduces your effort of being physically present at the exchange to lock a transaction. A trading account helps you save and invest conveniently.