Types of Trading Account In India

A trading account is a mandatory requirement for buying and selling securities in the secondary market. When linked with a demat account and a bank account, it facilitates seamless trades and dematerialised holdings. However, if you are just getting started with your journey in the financial markets, you need to know what the different types of trading accounts are.

This will help you better understand which type of trading account aligns with your trading strategy. You can open an account accordingly and begin participating in the financial markets.

Read Also: What is a trading account and its benefits?

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The Different Types of Trading Accounts in India

Trading accounts can be grouped into different categories based on various parameters like the nature of the asset traded, the availability of online services and the number of linked accounts. Check out the most common types of trading accounts you can open in India, and get a clear picture of how these accounts work.

Different Types of Trading Accounts Based on Asset Traded

Depending on the type of securities that can be bought and sold using your trading account, you can opt for the following two categories. That said, today, trading accounts offered by most leading brokers support transactions in multiple market segments.

• Equity Trading Account

  As the name indicates, an equity trading account helps you trade in stocks and stock derivatives like futures and options. If you wish to take delivery of dematerialised stocks, you need to open a demat cum trading account. An equity trading account alone is not enough to purchase shares via an Initial Public Offering (IPO). However, in case you plan to trade only in the derivatives segment, you can buy and sell futures and options using this type of stock trading account.

• Commodity Trading Account

  A commodity trading account was originally used for trading in the commodities segment of the financial markets. Earlier, the regulation of trading in the equity and the commodities segment was handled by different apex bodies. However, the SEBI now oversees both these segments of the financial market. Nevertheless, there are separate trading accounts that you can use for trading in commodities alone.

Different Types of Trading Accounts Based on Online Facilities

With the rapid digitisation of the financial markets, all leading stockbrokers now offer online trading support and services. Based on the availability of these facilities, there are two different types of trading accounts.

• Offline Trading Account

  An offline trading account is not a physical account that requires you to visit any branch. Rather, it simply does not support online trading via a mobile trading app or an online interface. You will have to call your broker and place your buy or sell order over the phone. The broker will then execute the order for you, on your behalf.

• Online Trading Account

  An online trading account is perhaps the most common type of trading account we have today. With this type of account, you can place orders in different market segments online. Typically, leading stockbrokers today offer the option to trade online via different interfaces like a mobile application, a web terminal or even a desktop application.

Different Types of Trading Accounts Based on the Linked Accounts

Trading accounts can only help you buy or sell securities in the stock market. To store the securities purchased in a dematerialised format, you need a demat account. To debit the funds needed for a purchase or credit the amount received from a sale, you need a linked bank account. Depending on the accounts linked, there are two different types of trading accounts.

• 2-in-1 Trading Account

  As the name indicates, a 2-in-1 trading account consists of a demat account and a trading account that are both linked together. This makes it easy for you to buy dematerialised securities and hold them electronically. You can also easily sell your dematerialised holdings in the market through this type of trading account.

• 3-in-1 Trading Account

  A 3-in-1 trading account is linked to a demat account as well as a bank account. This account goes the extra mile and facilitates seamless fund transfers to and from the linked bank account whenever you execute a trade. Today, most brokers offer 3-in-1 trading accounts.

Different Types of Trading Accounts Based on Range of Services Offers

With the rapid digitisation of the financial markets, all leading stockbrokers now offer online

• Discount Trading Accounts

  You can open a discount trading account with a discount brokerage firm. These firms offer the basic tools and services required for trading at affordable prices. Hence, the name discount brokerage. This type of trading account may be suitable for you if you only wish to trade in some market segments or if you are a beginner to trading.

• Full-Service Trading Accounts

  A full-service trading account is a type of account that you can open with a full-service brokerage firm. The fee charged may be higher than the cost of discount brokerage services, but you get comprehensive facilities like advisory services, research and analytics, stock suggestions and more.

Conclusion

This sums up all you need to know about the different types of trading accounts. You can compare the options available, their costs, services offered and features before deciding which type of trading account you wish to open. If you are planning to trade frequently, it is best to open a trading account that offers all services under one common umbrella.