Types of Trading Account In India

Types of Trading Account In India

In today’s times, investing in the stock market has become a major source of income for several investors. As 3.6 crore investors are investing in the stock market daily, the numbers are rising rapidly.
To invest in the stock market, one needs to know the importance of the Demat and Trading account. However, many people know the Demat account but don’t know what a trading account is?
A trading account is an account that holds all financial assets like equities and derivatives and differs substantially from several other accounts.
A trading account helps the investors to buy and sell shares within a day. This article will illustrate different types of trading account in India.

An equity trading account helps the traders to trade in stocks, futures, and options trading. Even trader has the opportunity to deal currency derivatives by using its existing trading account.
However, an equity trading account is not sufficient to subscribe for an Initial Public Offering (IPO), trade-in commodities, or take the stocks' delivery.
If an investor is looking to subscribe for an IPO or take the delivery, he must need a Demat account to store them.
And if he is looking to invest in future or trade options, an existing or new trading account is enough as no delivery is involved in options and the future.

Commodity trading account plays a vital and crucial role in the commodity market. However, an investor needs to open a commodity trading account if he is looking to start trading in commodities.
Even though the working of trading in commodities is similar to trading in equities, this type of trading account is opened with a registered commodity broker and recognized commodity exchange in India.
There are two popular and important commodity exchanges in India:
The Multi Commodity Exchange (MCX)
The National Commodity and Derivatives Exchange (NCDEX)
Earlier, the regulator for checking commodities and equities was different, but a few years back, commodities trading was taken under the Security Exchange Board of India (SEBI) regulation.

If a trader is looking to trade offline, he can make the transactions by calling a reliable stockbroker and placing an order. Another way of trading is to visit the broker's office and place the order physically. However, the offline way is more hectic and time-consuming.
Whereas in online trading, the trader has to make a call, and all the desired transactions will be successful with the help of trading software built by a reliable stockbroking firm or by using a mobile trading app.
A trader does not have to physically visit the office as it can be done conveniently and hassle-free. The major benefit of online trading is sitting in the comfort of one's home and making transactions.

To start trading in the Indian stock market, a trader will need three different types of accounts:
1) Bank account
2) Demat account
3) Trading account
A trader has to transfer the money from his bank account to a trading account and then can use this money to buy or sell shares through a trading account.
However, all the shares purchased will be stored in a safe and secure Demat account. Very few brokerages offer a 2-in-1 trading account that integrates only with Demat and the trading account.
The primary purpose of a 2-in-1 trading account is to ensure fast and seamless transfer of shares from trading to the Demat account when shares are purchased.
The 3-in-1 trading account goes one step ahead of the 2-in-1 trading account because it delivers additional facility in integrating banking services with trading and Demat account.
Several brokerage services offer 3-in-1 accounts to ensure safe transactions and transfer funds from one account to another.
Although it’s not a big advantage, several broking platforms allow investors to transfer the funds from their bank accounts to the trading account without any trouble.

A discount broking account is a normal type of trading account that does have any additional services. Brokers dealing in discount broking account offer call and trade facility and does not offer offline trading.
However, these traders are very expensive for investors because it trades high volumes at a very low cost. An investor is allowed to execute trading transactions if he has a discount broking account.
This type of account has low brokerage costs as the operating costs are relatively low than other types of trading account. Also, they do not offer any extra perks like financial advice or research service for their customers.

When it comes to the execution of trades, a full-service trading account offers several types of services compared to a discount broking account.
An investor has the opportunity to use advisory services and take financial advice when he is unable to make trading decisions on his own.
He can also use multiple integrated research tools to keep an eye on current market trends and make decisions after thorough research.
In simple words, a full-service trading account help investors save crucial time in researching the entire market and making trading decisions.

  • What is the difference between 2-in-1 and 3-in-1 trading accounts?
  • A 2-in-1 trading account that integrates only with Demat and the trading account. However its similar to 2-in-1 trading account but it goes one step ahead as it delivers additional facility in integrating banking services with trading and Demat account.

  • How many type of commodity exchanges are there in India?
  • There are two popular and important commodity exchanges in India:
    1) The Multi Commodity Exchange (MCX)
    2) The National Commodity and Derivatives Exchange (NCDEX)

  • What is discount broking account?
  • A discount broking account is a normal type of trading account that does have any additional services. Brokers dealing in discount broking account offer call and trade facility and does not offer offline trading.

Final Thoughts

A trading account is essential to enter stock markets and accumulate higher profits. After getting a clear understanding of different types of trading account in India, one should carefully think and decide what kind of account is best preferable according to their interests and requirements.
An investor or trader must choose a reliable brokerage firm to open a trading account to prevent glitches and make their account safe and secure.