Objectives of Trading Account

Last Updated: Mar 21, 2024 Value Broking 6 Mins 3.1K

Online trading has become a favorite choice for millennials. The transactions that happen using online brokerage platforms are safe. Investors and traders look at the brokerage charges and verify the best service and affordability.

However, this article will brief you about the objectives of a trading account. But let’s begin with the primary charges that come with a trading account.

The Primary Charges of a Trading Account are as Follows

In contrast, preliminary charges are upon each trading account irrespective of the broker or firm. To know more about the charges you can check the following points.

AMC of a Trading Account

The AMC of trading is an early charge which starts from 200 rupees to more depending upon your brokerage charge. Many firms jointly charge Demat and trading account maintenance to better value for money deals.

Trading Account Opening Charges

DPs will charge you for opening a trading account on their platforms, while there is zero trading account opening charge on some stockbroking firms.

Transaction Cost

You need to pay the amount to the broker as a charge of service. These charges are less in online stock marketing if you want to understand the transaction cost than checking with the broker website charges column.

What are the Objectives of a Trading Account?

To understand the objectives of a trading account, you must understand what a trading account is.

What is a Trading Account?

A trading account or an online trading account is the medium or link between your bank and Demat account. Having your trading account eliminates the need for an offline broker visit. The online trading account objectives are to allow users to trade and make easy settlements without any waste of time & other resources. There are two types of trading accounts that are available to open. Both have different functions. The purpose of trading on an exchange is to perform minor purchases and sells (referred to as “trading”) of digital coins or tokens referred to as “digital currencies” or “cryptocurrencies” (such as Bitcoin, Ethereum, Litecoin, etc.). To trade digital currencies, you’ll need a trading account. On the other hand, trading on cryptocurrency exchanges necessitates a distinct set of technical abilities and knowledge than trading on stock exchanges.

A Standard Trading Account

The standard or common trading account covers all the basic needs of investment. It allows you to trade in equity and do both intraday and delivery, F&O, ETFs, mutual funds, and foreign currency. Most beginners open this account and use it for their trading journey.

A Commodity Trading Account

You will need to open a commodity trading account if you plan to invest in gold, silver, and crude oil. You must open a commodity trading account with a commodity broker.

These commodity brokers should be registered with NCDEX and MCX. Trading commodity futures is possible through your commodity trading account. Just make sure that both accounts are linked to each other.

Listing down Trading Account Objectives

Here are the following primary goals for setting up a trading account:

To Indicate Gross Income And Expenses: At the end of the month, the trading account determines the business’s gross profit and loss.
To Show Net Purchases And Sales: During the accounting period, the trading account defines the rate of net purchases and sales.
To Display Cost Of Products Sold: At the end of the time, it evaluates the cost of goods sold. The following formula can be used to compute it:
Starting Stock + Buy – Final Stock = Cost Of Goods Sold
Price Fixation: A trading account aids in the determination of a product’s selling price by displaying the connection between revenue and the cost of products sold.
To Understand Expenses: Understanding factory expenses is beneficial.
To Display Stock Position: A trading account displays detailed stock position information.
Business Efficiency: It aids in the measurement of improved competitiveness by comparing revenues and expenses.

Features and Benefits of a Trading Account

Here are a few benefits of having a trading account.

One-touch Access

A trading account’s objective is to provide a complete package that brings all your investment under one roof. You get the benefits of all the crucial ratios through trading accounts, which help you make better decisions.

Reliable Information

With the correct information at the right time, you can make the best decision on your equity investment. When you have an online trading account, the objective of the trading account is to extend some value-added service. The service includes reports and analyses prepared by a professional. These reports and news help your probability of earning and making higher returns.

Customization

You can get customized support for your needs. You can connect with customer service to get accurate information about your problem and solve it from a professional representative. Many stockbroker firms provide SMS and email notifications when your set stock target hits a particular price. You can opt for notification of the app regarding the alert of the set target.

Flexibility

Today stock trading has become an app-based platform. You can easily access it through a laptop smartphone with internet service. Online trading offers easy flexibility and comfort to track all your investment without going somewhere else in a single view.

Significance of a trading account

It aids in determining the profitability of a business by displaying the link between gross sales and profits.
It displays the cost of goods sold to gross profit ratios.
It gives information on the effectiveness of trading actions.
It makes comparing sales, cost of products sold, and gross profit more easy.
It aids in the provision of closing stock information.

Conclusion

This article, “Objectives of a trading account” covers crucial aspects of a trading account. A trading account helps you to participate in the Indian stock market with ease and convenience. When you have this account, you do not need to visit the stock exchange physically. All you need is a few clicks on your device, and you can place orders for random investments or trades. The objective of a trading account is to make online share trading easy yet less expensive and to encourage traders to earn and grow more. Thus, it is easy to understand the trading account objectives.