What is Trading Account & How it Works? - An Overview

Consider your trading account as an online investment account that you use to transact in securities and monitor your trades. Just as your demat account holds all your investments in one place, your trading account enables you to conduct transactions — buy and sell in the stock market on any stock exchange.

What is trading account?

Complementary to your demat account, a trading account is also essential when investing in the stock market. You can buy and sell shares and other securities in the stock market electronically through your trading account. The main difference between a trading account and a demat account is in its functionality. The former is used to buy, sell and transact in shares, bonds and securities, while the demat account holds your shares and securities that you've purchased.

Additional Read: What you need to know about Margin Trading

Why you need to open trading account in India?

To buy and sell shares, you need to open a trading account. Additionally, it also gives you:

Access to stock exchanges

You can trade across stock exchanges simultaneously with your online trading account. In the early days of the stock market, it was unmanageable to trade in multiple stock exchanges as all scrips and shares were held in paper. Today, through a single window and platform of your trading account, you can access any or all stock exchanges for seamless trading.

Financial information and updated research reports

Full-service, well-established, and award-winning stockbrokers provide you with in-depth financial information and analysis of the stock market's latest news. When you gain access to credible information, financials and analysis of listed companies, it enables you to make smarter trading decisions and invest according to your financial objectives.

Ease and convenience

Once you log in to your trading account, you get access to the Indian stock market from any part of the world and at any time. All you need is a smart device connected to the Internet to allow you to view and track your investments, and transact in securities conveniently.

Seamless transactions

Powered by state-of-the-art technologies, your online trading account allows you to conduct trading smoothly and without hassle. Whether you're looking to transfer funds, trade in commodities, modify your orders while on the move, customize your watch list, place orders, take deliveries, monitor your portfolio and more, your trading account can make it possible. Besides, you also benefit from instant notifications on any transaction you make via email and SMS.

Additional Read: Importance of fundamental analysis in equity investing

Features and Benefits of a Trading Account

A trading account is a must if you want to trade on the stock market by buying and selling securities. While a demat account helps you store securities in a dematerialized form, a trading account is instrumental in facilitating seamless transactions. Here are the features and benefits of a trading account:

• A trading account allows you to trade in the stock market easily from anywhere by using your mobile phone or computer.
• When you open a trading account, you can also access expert recommendations and analysis reports for various stocks and sectors.
• Opening a trading account also enables you to enjoy regular updates and news alerts about the market.
• You can also increase your exposure to various shares by using the margin investing option.
• You can trade in real-time without experiencing delays in order to maximize your chances of making a profit.
• You can use a trading account to invest in a range of securities from stocks and gold to forex and derivatives.
• Opening a trading account online is as easy as could be and requires minimal documentation.

Where can you open a trading account?

You can open a trading account with a registered stockbroker who works as an intermediary between you and the stock exchange. When you open a trading account, you are assigned a unique user ID mapped to your account. Additionally, your account is also protected with a password for added safety measures.

How to open trading account?

• To know how to open a trading account, you need to:
• Select a full-service and well-established broker.
• Look at the various brokerage rates and services provided and choose a plan.
• Connect with the broker to open your trading account.
• Complete the account opening form and fulfil the Know Your Customer [KYC] norms by submitting your identity and address proofs.
• Get your application verified.
• Receive your trading account details with a login and password.
• Begin to trade.

Documents Required to Open a Trading Account

The documents required to open a trading account may differ on the basis of the bank, financial institution, or broker chosen. However, in general, you will have to submit the following documentation:

• Duly filled and signed account opening form
• Identity proof via PAN Card, Passport, Voter’s ID, Aadhaar Card, Driving License, etc.
• Address proof via documents like utility bills, bank statements, Ration Card, Passport, Voter’s ID, etc.

Additionally, you also have to complete the KYC procedure.

Trading account: Meaning, how to use and steps to open

What makes a trading account valuable?

Formally, when paper share certificates were rampant, the stock exchanges would use an open outcry method. Based on the system, if traders were looking to buy or sell shares, they had to be physically present in the stock exchange. Not only that, they had to communicate verbally with one another and other trading parties that appeared like a massive shouting match.

Today, the stock market is wholly online. And so, the open cry method has been totally replaced by online trading accounts. So, if you wish to buy and sell shares, you no longer need to visit the stock exchange and jostle with other traders. All you have to do is log into your trading account and transact seamlessly in the comfort of your location.

Additional Read: Understanding different types of equity trading

What you need to know before choosing a broker to open trading account

While several stockbrokers in the market offer the facility of opening a trading account with them, it is essential to compare and choose the right one. Here are some tips to help you select the right broker to open trading account.

Consider your investment options

Not all brokers provide you with the same set of investment options. While one broker may give you the opportunity to trade in equity and derivatives, another may provide you with the entire gamut from government securities, debt securities, mutual funds, bonds and more. Having a reputed and award-winning well-established broker that allows you to invest in an extensive range of products while at the same time giving you updated research and analysis on stock information is ideal.

Look into the trading platform's stability

When looking to open trading account, know more about the trading platform's performance track record. Trading platforms that crash quickly, come with glitches and are often non-responsive can hamper your trading experience. Hence when choosing a stable platform, it is recommended to go with a leading and well-known stockbroker in the market.

Easy to use interface

When you trade, you need to have the right balance of user interface functionality. It should neither be too complex nor basic. The interface must be user-friendly enough for you to understand the information and transact seamlessly.

Customer support

Choosing a trading account backed by excellent customer support service is highly recommended. That's because, when it comes to trading in the stock market, there may be times when things may not go as planned. Having a well-experienced customer support team that’s instantly responsive, understands your needs and resolves issues without delay can support quick and efficient trading whenever you need it.

Additional Read: Know when to exit a stock

Conclusion

When you open trading account, remember to link it with your demat account to transact and store your securities seamlessly. If you are new to online trading, learning more about the stock market can be a helpful way of understanding how trading platforms work and how to go about it. Ensure you receive all resources and tools that your stockbroker offers you to benefit from a smooth trading process on time.

Disclaimer: ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470.  The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  Investments in securities market are subject to market risks, read all the related documents carefully before investing. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents are solely for informational and educational purpose.