In the stock market, a trading account allows you to purchase or sell equity shares in the stock market. In the past, traders were required to be physically present at exchanges and use verbal communication and hand signs to convey their decisions.
At present, all you need to do is open a trading account with a registered stock market broker who conducts transactions on your behalf. Each account has its unique ID which is used to trade online.
Find out more about what is trading account, how it functions, its features and benefits, along with other details:
What is a Trading Account?
A trading account is an investment account that contains cash, securities or other holdings. These are ideal for investors who buy or sell their investments frequently. Furthermore, they serve as a link between an investor’s bank account and their Demat account, and funds are debited or credited on all purchases or sales.
How Does a Trading Account Work?
When buying shares, you place your orders through your trading account, which is then sent for processing in the relevant stock exchange. Once executed, the shares are then credited into your Demat account, and an equal amount of money is debited from your registered bank account.
A similar process is followed while selling equity shares. You can place a sale order through your trading accounts which is then processed by an exchange. On completion, the specified number of shares are debited from the Demat account, and the amount is credited to your bank account.
Benefits of Using a Trading Account
1. Easy Trading
The new-age platforms and mobile apps have made it easy to access your account and transact in an easy and seamless manner. In addition, you can also enable alerts through emails or SMS to get notified about buy/sell targets.
2. One-stop Access to Multiple Stock Exchanges
With a trading account, you can access various stock exchanges simultaneously, including the Bombay Stock Exchange (BSE), National Stock Exchange (NSE), and more on a single platform.
3. Seamless Transactions
Since the trading process is completely digital, you can conduct all stock market-related transactions in a smooth and seamless manner. This can also result in quicker processing and transfer speeds.
4. Credible Information
Trading accounts also offer invaluable services such as showcasing financial and research reports by experienced professionals. This can help you make informed decisions regarding your investments, thereby potentially resulting in higher returns for you.
5. Highly Customizable
Investors with trading accounts can be provided with customized support by trained executives, as per their requirements.
Things to Consider Before Selecting a Trading Account
Here are some of the basic parameters to keep in mind before you choose a trading account:
- Ease in the account creation process
- Diversified investment options
- User-friendly interface
- Varied range of facilities
- Stable investment platform
Steps to Open a Trading Account
The following are the steps you can take to open a trading account online:
- Visit the official website of a reputed broker
- Submit your application by filling in your personal and bank account details
- Upload the necessary documents
- Let the broker verify your application
- Receive your account details on your registered email address
- Start trading by logging in to your account
You can also open a trading account offline by finding a reputed brokerage firm and enquiring the same. A representative will then get in touch with you with the application and KYC forms. On successful verification, you will be given your trading account details.
Documents Required for a Trading Account
During the verification process of opening your trading account, you may be required to produce certain key documents. These include:
- PAN Card along with valid photographs
- Aadhaar Card/ Driving License/ Voter ID Card/ Passport
- Identity cards issued by State/Central Governments and its various departments
- A copy of the ITR Acknowledgment slip submitted to the Income Tax Department
- Income history as per the most recent bank account statement in the last 6 months
- Current month’s salary slip
- Identity cards containing your address such as Voter ID card, Passport, Driving licence, etc.
- Bank passbook or utility bills not more than 3 months old
- Self-declaration of address provided by High Court and Supreme Court judges
Opening a trading account can be highly beneficial for you for several reasons, and the right brokerage company can potentially help maximise your overall returns. Also, please note that opening a demat account is a prerequisite to start trading stocks online. You can open a Demat account through a depository participant registered with NSDL or CDSL. In India, there are mainly two different types of Demat accounts – CDSL and NSDL Demat accounts. Once you have opened a Demat and trading account, you can easily buy and sell securities online.