[ecis2016.org] A trading account is a useful tool for investors planning to invest in the stock market. Here’s a complete guide on what a trading account is, the documents required, advantages and related information
What is a trading account?
A trading account is an essential tool for investing money in the stock market. It contains securities, stocks or shares, or other significant holdings of liquid assets. It allows investors to frequently buy or sell shares in the same trading session on the stock market. Investors hold assets for the short term and are separated from a long-term buy and hold strategy.
You are reading: Trading account: Everything you need to know
Basics of trading account
A trading account is similar to a brokerage account. Here the level, purpose, and risk involved in the financial activity are high. A trading account is used for day trading, where the purchase and sale of security take place within the same day under a margin account.
All trading accounts are linked with a Demat account used for depositing shares once purchased from the stock market. Therefore, to trade in the stock market, the Demat account, a trading account is a must for investing in the stock market. These accounts are open in a firm that registers with the stock exchange.
What are the documents required for a trading account?
- PAN Card
- Aadhar card
- A mobile number linked to Aadhar (mandatory to receive an OTP and sign the account opening form).
- Proof of bank account in your name – your bank account details, i.e., account number and IFSC code.
- A scanned copy of your signature. The signature must be with ballpoint or ink pens.
- Income proof (optional) such as a photocopy of your ITR (Income Tax Return) acknowledgement slip, net worth certificate, salary slip, or the latest bank statement.
Trading account advantages
Smooth and continuous transaction
A vital advantage of having a trading account is seamless transactions between trading, Demat, and bank account. It makes transferring funds and conducting equity trading simple and quick. You may find multiple exchanges in India that trade in different securities and commodities on one platform. You can start your journey towards wealth-creating with one click.
Reliable information
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Investing in the equity market is about taking an informed decision timely. Several online platforms backed by experienced professionals provide extensive research reports to all the investors. This strengthens the probability of earning higher returns.
Determine profit and loss
A trading account helps the traders to track a profit and loss of a certain company which helps to measure the profitability position of the particular company for a certain period.
Flexibility
The online trading platform applications are accessible on mobile, tablet, computer, and other hand-held devices. It allows the user to track investment from anywhere, anytime.
How to open a trading account?
Select broker or firm
Several banks and individual companies register as brokers at the stock exchange. Individuals need to select a broker to open their trading and Demat account.
Compare brokerage rates and services provided
Several brokerage firms do not have a brokerage rate. However, a certain fee is taken to process orders. So, it is advisable to compare brokerage costs across the platform.
Enquire about account opening
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After selecting a brokerage firm, get in touch to enquire regarding the procedure to open a trading account.
Fill out forms and KYC applications
One can fill open a trading account and KYC (Know Your Client) form online. You need to attach these two forms with relevant documents like a PAN card and Aadhar card.
Verification of the document
The firm will verify your details over a phone or email conversation.
Get your trading account details
Once you have your trading account details, you are eligible to buy or sell the share on the stock market.
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