What Are the Opening Fees and Charges of Trading Account

Day by day, more people have started to look at the stock market as a lucrative place to grow their wealth. This has led to a surge of new aspiring traders and investors in the stock market. That, in turn, has resulted in the opening of several Demat and trading accounts. However, it is necessary for you to know what you are getting yourself into before stepping into the stock market. You need to understand how the stock market works and what it offers. You should also learn about the expenses you will incur as an investor in the stock market. In this article, you will learn about your first potential expense as an investor. Actually, you incur this expense to step into the market.

The expense is regarding the fees and charges for opening a Demat account. A trading account has various charges associated with it.  It is essential to know all the expenses associated with a Trading account so you are not cheated. Research must be done to understand the charges applied by different brokers. It is important to note that some trading account charges are fixed, and being aware of them helps. Today we will discuss trading account opening charges. Before we discuss trading account opening Charges, let us understand more about a Trading account.

What is a Trading Account?

A trading account is used to carry out trading in the Indian stock market. It also can store securities and cash if you carry out day trading. It lets you trade for securities in electronic form. It is a convenient and fast way of trading shares. It also stores data about your transactions, allowing you to refer to them whenever you need them. It is used to trade various securities like stocks, bonds, commodities, etc. A trading account also holds information about all the transactions you carry out.

How Does an Online Trading Accounts Work?

Your trading account acts as the missing link between your bank account and your Demat account. Your trading account is linked to your bank account and your Demat account. It utilizes the money in the bank to buy securities, which are then stored in the Demat account. If you want to sell a share from your Demat account, you can place a sell order through your trading account. This order that you place through your trading account gets sent to the exchange. The order also gets registered with your trading account and is recorded in the system.

The exchange matches your order with an order placed by a buyer who is willing to pay the price you have asked for. Both parties receive a confirmation message about it. This information is also provided to the depositories and your broker. Brokers have a time of 3 days to settle the transaction and for the respective parties to receive the security and the money for it. If you wish to purchase shares, you place a buy order, and the process of receiving the shares is similar to that mentioned above. 

Which Type of Trading is Better?

Obviously, online trading is better compared to offline or physical trading in many ways. If you wish, however, you can carry out trading physically, i.e., contact your broker and ask him to buy and sell shares on your behalf. He will also help you out if you wish to know the value of your investments. Having said that, It can still be a hassle to trade with the help of a broker. This is because, in the case of physical trading, your broker can take days to complete the trade. They could even fail to place your trade order as well. This is either due to the inefficiency of the broker or the inefficiency of the physical mode of trading itself, which is quite rudimentary.  

Instead, you can opt for online Trading. A broker who provides online trading facilities can help you trade online. You have complete decision-making power. You can trade quickly on the go. It is pretty easy and convenient to carry out online Trading. You do not have to worry about your orders not getting placed on time due to the inefficiency of the broker or the system. The shares you purchase are also delivered into your Demat account without any delays. So now that you know why online trading is superior compared to offline trading, let us learn about the trading account fees. One must always be aware of trading account fees no matter what to know all the trading account charges no matter what.

Trading Account Opening Charges Explained

The initial or main trading account fee is the one you pay while opening a trading account. This fee is also called trading account opening charges. You pay a one-time fee when you open a trading account. The amount to be paid for opening a trading account can vary based on the broker you choose to open the account with. A few full-service and discount brokers may charge zero trading account opening charges. While the other brokers have some trading account fees when you open a Demat account with them.

Apart from trading account opening charges, there is another trading account fee that you should be aware of. It is generally known as trading Account Maintenance Charges (AMC). This trading account charge must be paid yearly to ensure you keep using your Trading account. Like the trading account opening charge, the amount of this trading account fee varies from broker to broker. Some brokers can provide you with a Trading account for zero AMC, while a few will have some recurring trading account charge you might have to pay.

Features and Benefits of a Trading Account

Your trading account is a handy tool. If used correctly, it can help you achieve your financial goals. Here are a few features of your trading account.

Multiple Investments

You can invest in multiple types of securities. Not only that, but you can also invest in various Shares at once. Some brokers let you create a basket that you can use to buy multiple shares at once. One Trading account provides access to all exchanges in India.

Trading Platform

When you open a trading account with a stockbroker, you get access to their trading platform through which you can carry out your trading activities. Depending on the broker, the features available on the trading platform may vary, but these are the most common features found across most trading platforms. Through your trading platform, you can keep track of the stock market. It is a great way to check for prices and the situation of the stock market. Your trading may let you create watchlists, set alerts, and keep track of your portfolio. You may get access to the price charts of different shares and multiple technical indicators. You can access the trading platform through a web browser on a laptop or through the dedicated app on your smartphone. 

Apart from these two main features, here are the benefits

Convenient

You can easily Trade from your home’s convenience or on the go. With the help of online trading, you can trade on the go or place orders outside market hours.

Power of Investing

As everything is at the tips of your fingers, you can trade easily. Having a trading account enables you to trade on your own based on your liking. There is no middle man involved in giving you complete control over your investments.

Liquidity

With the help of a trading account, you can easily sell whenever you wish. It helps you gain money by selling your assets quickly.

Investment Reports

Your trading contains information about every trade you have carried out from the day you started trading. An extensive report can be made with the provided information to understand how you have been trading, if there has been an improvement or decline in your trading activity, etc. It is a great way to know how you are trading and how you can make better trades in the future. So before you decide to open a trading account, you should take note of the other charges imposed by the broker as well.

Conclusion

Stockbrokers charge a fee for opening a trading account, as per their policies, for providing you trading account services that enable you to trade. This account opening fee also acts as a revenue source for the stockbroker. Choosing the right stockbroker is probably the first major decision you make as an investor. So the account opening fees and annual account maintenance fees are some things to consider before making the decision. However, a stockbroker has other means of generating revenue as well. They included brokerage charges, DP or depository participant charges, and some other charges.

Frequently Asked Questions (FAQs)