What is a Trading Account and how to open a Trading Account? 

 

What is a Trading Account and how to open a Trading Account? 

What is a trading account? If we talk about the past years, trading and investing in Stock Market was a dream, but after the brokers became digital, the number of investors and traders is increasing year on year. Earlier, the brokers used to do all the transactions on their own, but as the technology is increasing day-to-day, the investors or traders can do buying and selling of the shares they want to. 

In this article, we are going to discuss what is Trading Account is and how can you open your trading account. To buy and sell the shares, we must have and Demat account and a Trading Account. We can keep our long-term stocks in the Demat account. 

What is a Trading Account 

What is a Trading Account?

A trading account is just like a bank account for the investors where he can keep the money for buying the shares, which is provided by the broker. In simple words, we have to deposit money in the trading account for buying shares. We can't buy shares directly from our account, that's why we need a trading account to keep the money for buying shares.

We can buy the shares of any listed company from the trading account. The Company must be list on National Stock Exchange (NSE) / Bombay Stock Exchange(BSE). We can not buy shares directly from Exchange but through the brokers. 

Also, read Who are brokers in the share market?

How does the Trading Account work?

Whenever we buy shares, the amount will be deducted from the trading account the shares will get transfer to the Demat account. It takes 2 days to transfer your shares to the Demat account. The share will get stored electronically in the Demat account. We can deposit and withdraw money from our trading account anytime. We can easily do the transaction of money transfer from the trading account to the bank account and vice-versa.

When we place any buy order through our trading account, it reaches to Stock Exchange through our broker and the amount will get deducted from the trading account along with the brokerage and charges.

When we sell our shares from the Demat account, the broker charges the brokerage and other charges and transfer the rest amount into our trading account.

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Example on how does trading account works

Let suppose you transfer Rs. 100000/- from your bank account to the trading account. Now you buy 100 shares of SBI @ Rs. 400, so Rs. 40000 (100*400) will deduct from your trading account (exclusive of the brokerage and charges from the broker), and the balance of Rs. 60000 will be in your trading account. You can any companies shares from the amount.

Do you want to know about Sensex and Nifty, read here

How to open a trading account online?

We must choose the broker which is recognized by the Securities and Exchange Board Of India (SEBI). You Can choose Upstox, Groww to open your account.

Steps to open your account online in the broker (Like, Upstox)

1.  Visit their website 

2. Fill in the basic details

3. Keep scanned copies of your documents like Aadhar Card, PAN Card, Cancelled Cheque, or current bank statement.

4. Upload all the concerned documents on the portal.

5. Enter the Aadhar details to receive the OTP on your linked mobile number to verify the identity.

You will receive a mail through the broker consisting of your Login Credentials. After receiving the ID and Password from the broker, you can log in on their platform with the ID and password you receive from the broker.

[You Must have an Aadhar Card, PAN Card, and a Bank Account to open a Trading Account. You can not open a trading account if you don't have any of these documents.]

Now let's discuss the benefits of having a trading account.

1. We can easily buy and sell the shares of any listed company from our mobile phones or personal computer or laptop. 

2. We can keep update about the market and can easily track the ups and downs from their portal or applications.

3. The major benefit is that if we don't have enough money to buy the shares, we can leverage the brokers to buy the shares.

Most people still have confusion about the difference between Demat Account and a Trading Account. So, now we will discuss what is the difference between Demat Account and a Trading Account.

What is the difference between Demat Account and a Trading Account?

Demat Account means Dematerialized Account. It means, it keeps/holds the shares which we buy, in the electronic form. Earlier, we used to get the physical certificate of the shares which we buy, but after the Demat account came into existence, we can keep our shares electronically and we don't need any physical certificate of the shares.  

On the other hand, the Trading account is mainly used for buying and selling shares. We can keep our funds in the trading account to buy the shares of any listed company. 

Most of the new traders open their accounts in a hurry, they don't analyze or compare any broker or do may not know how to choose the best broker. So, we will now further discuss how you can choose the best broker.

How to choose the best broker for trading in India?

We must keep these things in mind before selecting any broker for a trading account:-

1. Always choose the broker who is experienced and recognized by the SEBI,

2. You can select the broker whose brokerages and charges are low as compare to others. 

3. Always check their support system, customer service, etc.

4. Few brokerage firms provide advisory services to their customer, it can be free or chargeable, depending on the broker. If you don't want to do research then you can take their advisory services.

5. Always chose the broker who provides trading and investing through their application or through their website.

6. Always select the broker whose system does not hang too often. Take an example of Zerodha( Stock Broker), whose server always gets stuck in the market hour, so you can avoid these brokers.

Conclusion

So in this article, we have discussed What is a Trading Account, how to Open a Trading Account, the benefits of a trading account, and how to choose the best broker in India.

I hope that you might like the information provided by me. If you like the post on What is a trading account and how to open a Trading account, You can share this article with your friends and family, and don't forget to leave a comment on the post.