What is a trading account and its benefits?

What is a trading account?

A trading account, along with a demat account, is one of the prerequisites for buying and selling stocks. Trading account was preceded by the public outcry system in the 1980s where brokers used to call out the bids on the trading floor. However, with the advent of the electronic trading system in the mid-1990s, buying and selling of stocks has been done solely through online accounts.

Investors need to open a trading account with a SEBI-registered broker, such as m.Stock, which acts as an intermediary to conduct trades on investors’ behalf. A trading account is different from a demat account, which is used to store the shares purchased on the stock market. Brokers open demat accounts with a depository such as CDSL or NSDL on behalf of investors.

Importance of trading account

A trading account is a must to enable you to invest in different securities such as stocks, bonds, ETFs, currencies and so on. A trading account also gives you access to many technical analysis tools and charts, which help you make smarter investment decisions.

Furthermore, with technological advancement, trading accounts have substantially increased the speed and volume of orders that can be placed on the exchanges. This helps investors save time and trade more efficiently.

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Types of Trading Accounts

There are several types of trading accounts to choose from. By understanding these different types of trading accounts, you can opt for the one that best fits your trading style and investment goals.

• Equity Trading Account:

  An equity trading account is mainly for buying and selling shares, including futures and options. However, this type of account is not suitable for activities such as trading in commodities, or taking delivery of stocks.

• Commodity Trading Account:

  A commodity trading account is designed for trading in commodities like oil, metals, and agricultural products such as coffee. This account is ideal for those looking to trade in securities beyond the equity market.

• Online and Offline Trading Accounts

  Trading accounts can be classified based on how orders are placed:
  1. Online Trading Accounts: Orders are placed through mobile apps and/or internet platforms, providing convenience and speed. This type of trading account is largely paperless and well suited for tech-savvy people.
  2. Offline Trading Accounts: Orders are placed over the phone, allowing those who prefer personal interaction or do not have reliable internet access to trade. This is suitable for people not comfortable using online platforms.

• Two-in-One and Three-in-One Trading Accounts

  1. Two-in-One Accounts: These accounts combine a trading account with a demat account, facilitating easy trading and holding of securities.
  2. Three-in-One Accounts: These accounts integrate a trading account, demat account, and a savings bank account, allowing seamless transfer of funds and shares, making the trading and investment process more efficient.

• Discount and Full-Service Trading Accounts

  1. Discount Trading Accounts: These accounts offer basic trading services at lower costs. They are suitable for self-directed investors who do not need additional services like research, stock recommendations, and those who are proficient in trading in securities.
  2. Full-Service Trading Accounts: These accounts provide a range of additional services, including research reports, stock recommendations, and personalised advice, catering to investors who seek professional guidance.

• All-in-One Accounts:

  All-in-one accounts offer a comprehensive solution, allowing investors to trade in stocks, commodities, mutual funds, systematic investment plans (SIPs), bonds, Gold ETFs, and even participate in IPOs. These accounts provide a one-stop-shop for diverse investment needs, ensuring convenience and broad market access.

How does a trading account work?

Trading account is directly linked to your demat account and bank account. So to purchase securities, you will have to transfer money from your bank account to the trading account. As soon as the money is transferred, you can place the order through your trading account. Once the transaction is processed by the stock exchange and clearing corporations, the securities are credited to your demat account. Simultaneously, the proportionate sum is debited from your trading account.

Similarly, when you place a sell order, the shares will be deducted from the demat account, and the money will be credited to your bank account. It usually takes two working days after the transaction to reflect in your bank account.

Features and benefits of a trading account

Besides allowing you to buy and sell shares, trading accounts have several features and benefits to make your investing journey more efficient.

Features of Trading Account:

• You can make transactions via the broker’s mobile app and website.
• With the help of expert analysts, brokers give detailed recommendations to assess the best stocks in various categories.
• You can invest in multiple investment options, including mutual funds, options, derivatives, currency, and commodities.
• A trading account allows you to review your past order book to maintain the proper account of your previous transactions. This especially helps in filing tax returns and retirement planning.
• You can access the margin investing option to widen your horizon on different shares. mStock gives you the option to do margin investing in a hassle-free manner.
• You can place orders after market hours using the After Market Orders (AMO) facility.
• Trading accounts give access to daily market updates along with news alerts.

Benefits of Trading Account

• Swift and seamless transactions:

  Using a high-speed trading platform with a smooth user interface like m.Stock allows traders to make real-time transactions without technical delays. Moreover, a trading account helps you seamlessly liquidate assets, thus giving you access to your funds quickly.

• Customisation:

  Online platforms allow you to customise your watchlists and modify your orders. Moreover, you can set alerts via SMS or email to get real-time updates on buy and sell targets.

• Digital module:

  As trading has shifted to online platforms such as apps and websites, you can keep track of your investments from any device at any time. An easy online procedure further facilitates the quick and easy transaction of shares.

• Single Platform Access:

  India has multiple exchanges for buying and selling stocks and commodities. These include the National Stock Exchange (NSE), the Bombay Stock Exchange (BSE), National Commodity and Derivatives Exchange (NCDEX), and the Multi Commodity Exchange (MCX). Your online trading account allows you to invest in all these exchanges via a single platform.

• Access to High-end Information:

  Having a trading account with an online platform gives you access to reliable and exclusive research material developed by experienced professionals. This substantially increases the chances of getting higher profits and good investment decisions.

Process of opening a trading account online on m.Stock

To open a trading account, you have to choose a registered stockbroker. Then fill in the client registration form along with the prescribed details and documents mandated by SEBI.

Also, you have to submit the account opening form and the Know Your Client (KYC) documents, including

• The latest passport-size photograph.
• Identity proof such as pan, driving licence, aadhaar, passport, voter id or any other authorised photo identity.
• Address proof such as ration card, passport, voter id, driving licence, bank passbook, electricity bill, self-declaration from the high court or supreme court, or any other identity card or address proof issued by a recognised authority.
• Photocopy of the pan card.

As soon as the documents are submitted and verified, you will receive your account details along with a unique identification number known as the client code.

m.Stock is a SEBI-registered broker, which enables you to open a trading accountI on its platform within minutes. Follow the below simple steps to successfully open a trading account on m.Stock:

1. Enter your Mobile Number and fill out the online KYC
2. Verify your personal information, including address proof, identity proof, PAN number and date of birth.
3. Select from payment options for a trading account that is apt for you, and make the payment online.
4. Add your bank account and complete your profile.
5. eSign the Trading account opening form.
6. Upon successful verification, your demat account will be operational within 24 hours, and login credentials will be shared on your registered email id.

Trading account calibrates the starting stage of your investing journey with seamless transactions, flexibility and exclusive research information. This ultimately helps you make the best investment decisions and keep you at the top of your game.

Read Also: A Complete Guide on How to Open Trading Account

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