It might be difficult to know where to begin when you're new to the world of investing. Opening a trading account is one of the greatest methods to get started. A trading account provides you with a platform for buying and selling stocks, ETFs, and other investment products. This provides you with access to a diverse selection of investment choices as well as the opportunity to practice and improve your investing abilities. Without a trading account, you can’t trade in the Indian stock market. You have to open a trading account to do so in 2 ways, by going to the broker physically and completing all the formalities for opening a trading account online. Finding the right stockbroker for you is an important step as it can’t help you in the long run.
A stockbroker is a depository participant who also always wants you to open a Demat account. Your trading account is linked to your Demat account and your bank. Funds are debited and credited from your bank account while your Demat accounts act as a bank for securities. Without a trading and a Demat account, you can’t trade in the Indian stock market as all trading is now done electronically. Also, shares are traded in the Dematerialized form and are easily traded. It has been possible majorly due to the internet.
With the adoption of the Demat account and a trading account, forgery of shares is now impossible. Shares are not lost as well while their ownership is being transferred. As the paper has been eliminated from the process, the charges have been reduced. You may be wondering about “How to open a trading account?” in detail. So, let’s discuss how to open a trading account in detail.
To open a trading account, you can approach any depository participant who will help you out. You must select a stockbroker based on the segments you want to trade in, like shares, commodities, currency pairs, futures and options, etc. Choosing the right stock broker for you is crucial as it can be beneficial in the long run.
Documents Required to Open a Trading Account
For opening a trading account, here are the documents needed -
Identity Proof: Your PAN card is used as identification proof.
Address Proof: Your Aadhaar Card, Passport, Driving license, etc. can be used as Identity Proof
Proof of bank account.: A canceled cheque or six months of bank statement can be shown as proof of a bank account.
Income Proof: You need to provide your income proof, salary slip for three months or a bank account statement.
Photograph: A passport size photograph of you has to be submitted with the above documents
Signature: You have to upload your signature on a blank paper if you’re opening a trading account online.
Uses of a Trading Account
For the modern trader, a trading account is the modern equivalent of a castle. It's where you may both expand your empire and protect your assets from the market. It's where you can make your wealth and defend it against the market. A trading account is used for trading in the Indian stock market. After you open a trading account, you can access it from the comfort of your home and carry out trading. You can also keep track of all the trades you have carried out. It provides complete information regarding the shares you have bought and sold in the stock market. With the help of your trading account, you can trade in all the exchanges in India. trading accounts are beneficial since:
They allow you to trade currency, exchange-listed equities, and other financial securities.
They might be either digital or physical accounts. trading accounts on the internet can be accessed from anywhere.
They have comprehensive analytics and research capabilities, as well as mobile apps and the ability to set up alerts.
Step to Step Guide on Opening a Trading Account
Opening a trading account is as simple as opening a Demat account. Most stockbrokers in today's day and age provide a 2-1 account service. It means their trading account opening service is integrated with the Demat account. All you need is to provide your PAN Card, and Aadhaar Card and complete your e-KYC to get your account opened. Here’s the simple process for opening a trading account online.
Choose a stockbroker through whom you’ll carry out trades and open your Demat account.
Fill out the account opening form
Upload your photograph with other documents and signatures.
Complete eKYC and you are done.
There are no additional steps, and you can start trading once these steps are complete.
Benefits of a Trading Account
After you open a trading account, you can use it to its fullest. It’s very beneficial and necessary to have a trading account to trade in the Indian stock market. It helps you trade in the stock market and commodities, currency pairs, future & options, etc.
When the stock market came into existence, you had to carry out trades physically. An open-outcry system was used where traders used hand signals and verbal communication to buy and sell shares. This outdated system ended up being too sophisticated and chaotic. It made it difficult for traders to make efficient trading decisions. It all changed when trading took place with the help of the internet. You may be wondering now, Let’s discuss “What is a trading account” in detail.
In India, you need a trading account to carry out trades. It’s similar to a Demat account, yet entirely different. You no longer have to be physically present to carry out trades. You can sit in the comfort of your home and use a platform provided by your broker to access your trading account and trade in the stock market. While a Demat is used to store various securities like shares, government bonds, mutual funds, etc., a trading account is used to buy or sell these securities.
Objectives of a Trading Account
After understanding “What is a trading account definition,” in short, let's understand its objectives. A trading account is beneficial. Following are the objectives that are fulfilled with the help of the trading Account.
You can keep track of orders placed through the trading account. It includes orders that have been executed, partially executed, and failed orders. The whole list is also called an Order book.
You can monitor and compare all your trading activity to the previous years with the help of the trading account history. It helps you know how much growth has taken place in your trading.
It provides information on all stocks on every trading day from start to end.
Your Trading helps you determine your stock turnover ratio. It helps to understand if the company you’ve invested in is successful or not.
Modes of Opening a Trading Account
To understand a trading account, in detail, you will also have to understand the modes of opening a trading account. You can open a trading account offline and online. An offline trading account can be cumbersome and outdated. In today’s day and age of the internet, an online trading account lets you take your investments into your own hands. You can use this account to invest and carry out trades you like.
However, you will have to approach a broker to open an offline trading account. You will have to fill out a form and submit a few documents. If you ever choose to trade, you’d have to contact your broker to make a trader on your behalf.
You can open an online trading account with the help of any stockbroker who provides online trading services or a mobile application. You can complete this process by sitting at your home comfortably. Apart from this, you can also make your own trading decisions, buying and selling stocks whenever you wish to. It lets you trade instantaneously, letting you take investment matters into your own hands.
Importance of a Trading Account
A trading account is essential to carry out trades in the stock market. It helps you buy and sell shares on the share market. With its help, you can make trade decisions taking you one step closer to financial freedom. A trading account can help you impose limits on your trading activity, ensuring you drive yourself to the ground by trading everything. It helps carry out trades quickly, maximizing profits. With the help of your trading account, you can place buy or sell orders, even outside of trading hours. It helps gauge your position and gain insights into your trades by providing the complete history.
Not only does a trading account help in carrying out trades, but it also links your bank and Demat account. The money in your bank account is used by your trading account to buy shares. After successfully buying a share, it gets deposited into your Demat account for storage. If you choose to sell a share stored in your Demat account, you’ll have to place a sell order through your Demat account. Once sold, the money is transferred to your bank account. Hence a trading account plays a crucial role in helping you invest your money and sell shares as and when required.
Why do you need a Trading Account?
A trading account is beneficial. Here are a few reasons for having a trading account.
With the help of your trading account, you can trade easily in the stock market.
It provides information to know gross profit and sales, which helps measure a profitable position.
It also provides the ratio between the cost of the goods sold and gross profit.
It also provides information about the efficiency of your trading activities.
It provides information on all stocks like their current price.
You can use the information provided by the trading account to compare the cost of goods sold and gross profit.
Features of a Trading Account
Trading accounts come with a number of useful features that can assist you in making better trading selections. It gives stock market data in real-time. Also, tools like the S&P 500 Index can assist you to estimate how a particular stock will do in the future. Many times, an investor must use a stockbroker as a mediator, however you can access these features through your trading accounts regardless of which brokerage you employ. After opening a trading account, it can be very useful. Here are a few important features of a trading account.
Access Multiple Stock Exchanges
The majority of Indian investors can only invest in one exchange. This means that in order to invest in the Indian stock markets, you must first open a trading account with one of the exchanges. The most important ones being the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
The NSE is India's largest stock exchange, with the most variety in relation to the market, industrial trading, and individual investor trading. It's one of the very few stock exchanges around the world that allows you to trade on a daily as well as on an intraday basis.
The Bombay Stock Exchange (BSE) is India's second-largest stock exchange. It was established in 1875. The BSE is a hybrid market that is both public and part private. The Bombay Stock Exchange is where the majority of public shares are handled.
The convenience of being able to trade on a variety of exchanges and platforms without becoming confused by different symbols or being restricted to a single platform. You’re able to trade from anywhere during and after market hours.
On a digital platform, you can make purchases, bonds, and other instruments with a trading account. Trading accounts, on the other hand, provide a lot more than just the ability to purchase and sell assets. Various stockbrokers provide different features, all accessible through your trading account. You can use these tools to make informed trading decisions.
You can change your trading strategy and use your trading account to the fullest. You can easily make changes daily to ensure you always make a profit while trading.
Quick and Simple Transactions
Without opening a trading account, it’s difficult to trade in the stock market. Your trading account makes it easy to trade as it’s very simple. You just have to place buy or sell orders and execute them independently.
Your trading account provides all the charges applied while trading. It shows all your transactions with each brokerage charge, not hiding anything, ensuring you’re completely aware of any money lost to various charges.
Frequently Asked Questions
You can create a trading account in India from the comfort of your home. For opening a trading account online, you need to contact your stockbroker to help you with a simple process.
Yes, a trading account is a safe passage for buying or selling financial securities.
No, you do not need to have a Demat account for buying or selling shares, you can do transactions through your trading account. And a Demat account is needed to store all your financial assets.