Trading Account

All You Wanted To Know About Trading Account

Attracted by wealth-creation opportunities, many retail investors are interested in the stock market. If you want to trade, a demat and trading account is a bare minimum necessity. Still, there is some confusion in the minds of first-time investors about trading account. What does a trading account do? What is the difference between a trading account and demat account? Questions like these pop up in their minds. Here is an article that will help clear your trading account related queries. For simplicity, we have broken down the piece into 8 sections answering a key question about trading account.

Trading account is a platform to buy or sell shares and securities. A trading account can be opened with a registered stock broker and has to be linked to an individual’s bank account. A trading account facilitates smooth functioning of online buying and selling of shares. Multiple trading accounts can be opened and operated if an individual desires so.

A trading account to a stock investor is what a bank account is to a FD investor.

A trading account is a common platform to sell or buy securities.

A trading account is usually provided by a stockbroker such as Nirmal Bang.

Do note that investors are allowed to have multiple trading accounts. If you have multiple trading strategies like margin trading, long-term investing etc., you are free to hold multiple trading accounts.

Securities/shares are purchased through a trading account. They are held by opening a demat account. The payments for buying a share done through the linked bank account.

So, a trading account is important and comes with a demat account. Do note that a trading account must be linked to the bank account for smooth operation. The bank account provides the necessary cash to buy/sell shares.

Go to a stock broker and ask them about opening an account. For instance, Nirmal Bang’s demat and trading account opening is extremely simple. As a registered stock broking firm with stock exchanges, Nirmal Bang offers various types of trading accounts to cater to your trading appetite.

Here is an easy way to open a demat and trading account. Follow the 6-step process to Open a Trading Account and get going.

  • Step 1 - Compare the brokerage rates and the services included across all plans
  • Step 2 - Select the broker
  • Step 3 - Contact the broker for opening your trading account
  • Step 4 - Fill an account opening form. Provide KYC details and your ID and address proof submit
  • Step 5 - Go through the application verification process
  • Step 6 - Receive details of your personal trading account

There are a few points you must remember before you choose a specific trading account offer.

  • Pricing - Always consider the pricing structure. Some broking houses ask for a processing fee while opening the account.
  • Discounts - Some broking houses will discounts depending on trade activity. For instance, if you trade very frequently, there may be bigger discounts.
  • Service breadth - Good and established stockbrokers will have a dedicated team to interact with customers.

Just like a demat account application, the process for a trading account is easy and simple. When you apply for a demat account and trading account, the requirements are the same. You do not need to apply separately for a trading account.

Do remember that after the necessary documentation is submitted, verification will follow.

The stockbroker will provide trading details. These access details are to be used to take part in market operations. You will have a unique trading ID.

Do ensure that the trading account and demat account are linked.

Yes, you can open online trading account in India. To do this, open a brokerage account online. To get started, you will need to sign the Power of Attorney (PoA) in physical format as per regulatory norms.

You must know that having a trading account and demat account from the same institution helps. For seamless trading experience, this arrangement ensures good speed and efficiency.

Normally, it should take about a week for the verification and processing of the application related documents. Once the verification of documents is complete, a welcome kit containing your trading details is sent. It is safe to assume that you will get your details in 15 days time.

Since the term 'trading account' is always used with 'demat account', many new investors think they are one and the same. The key difference between a demat account and a trading account the purpose. A demat account is used to hold your share certificates and other documents in electronic format. A trading account is used for transactions i.e buying and selling these securities in the stock market.

An equity trading account is sufficient for trading in equities, futures and options.

It is currently not possible to trade in commodities with your existing equity/stock trading account. This means you will need a separate commodity trading account.

Offline trading accounts are the traditional accounts. They do not contain internet trading facility and have to call up your broker or go to broker’s office for trade.

The online accounts offer internet trading. This means you can buy or sell in the comfort of your house, office or even while travelling.

From a cost perspective, an online trading account will usually carry lower brokerage. The 2-in-1 trading account integrates the trading account and demat account.

Before anyone starts trading in the stock markets, they must know how to open a demat and trading account. Although the process is extremely simple, they need to take the first step, which is to open a demat account. It is equally important to know that discount brokers do not offer any add-on advisory service. They offer plain and simple execution of trades, which is why they offer low brokerage.

The full-service brokers charge a higher brokerage because they offer a host of services. Ultimately, you will have to choose what you want: simple service with no-frills or premium service.

There are numerous benefits of a trading account. For your understanding, we have highlighted below the most relevant benefits.

  • Single use point - A trading account gives investors accessibility to all the stock exchanges across the country, through a single platform.
  • Flexibility delivered - You can access your online trading account from anywhere, at any time. With internet browser and mobile app-based trading platforms, trading accounts can be accessed fast and easy across a variety of devices.
  • Smooth trades - Advancement of modern technology makes seamless transactions happen. For instance, the entire process of fund transfer and equities is blazing fast.

There are no trading account charges so it is a free trading account in one sense. But when you trade, there are some costs. For instance, the broker will ask for brokerage in equity delivery, equity intraday and equity futures & options trades. There is STT (shares)/CTT (commodities). Also, there are transactions charges imposed by the stock exchange - NSE and BSE. Plus, there are nominal stamp charges. Do note that there is 18% GST on brokerage and transaction charges. It is also important to know that stock broking houses levy annual maintenance charges too. As a client, you could also opt for a lifetime maintenance charge.