Understanding the Basics

The Indian stock market is among the few financial markets across the globe with a rich history that dates back to 1875. It started with several traders gathering under a banyan tree to buy and sell the securities in physical form. With time, the markets were standardised and the system of stock exchanges and brokers was established.

The stock brokers used to manage the client’s accounts by buying and selling the shares on their behalf for many years. However, with the digitisation of the securities market, this gap was reduced and the traders and investors had the ultimate hold on the buying and selling activities. This direct engagement was possible with the help of a trading account.

In this write-up, we will decipher what a trading account is, what are its types and how you can benefit from it. So without further ado, let’s dive right in.

What is a Trading Account?

A trading account refers to an account that enables you to seamlessly carry out trading of various financial assets. In India, it is mandatory to open a trading account if you wish to buy or sell shares of the listed companies. This account acts as an intermediary between you and the stock exchange and is opened through a registered stock broker.

So the simple answer to the question of – what is a trading account – would be that it is a platform to buy and sell shares listed on the stock exchanges. In addition to shares, a trading account allows you to practically trade in all the asset classes like futures, options, currency contracts, and even commodities like gold, silver, etc.

However, you must note that a separate type of account is required to trade in commodities due to different regulatory norms. This brings us to the types of trading accounts available in India. Let’s look at them.

Types of Trading Accounts

While understanding the meaning of a trading account is important, learning about its types is also vital to make an informed decision. In India, primarily two types of trading accounts are available. They are:

Equity Trading Account:

This is the regular or standard type of trading account offered by all brokers in India. Using this account, you can trade in shares, futures, options and currencies. The brokers offering these types of trading accounts are registered with the Bombay Stock Exchange and National Stock Exchange.

Commodity Trading Account:

This type of trading account is used by traders looking to buy and sell commodities such as crude oil, gold, silver, natural gas, etc. The brokers offering commodity trading accounts are registered with the commodity exchanges – Multi Commodity Exchange of India Limited (MCX), National Commodity and Derivatives Exchange (NCDEX), etc.

Further, based on the types of services and features, the trading accounts can additionally be classified into a few more types:

• Online Trading Account
• Offline Trading Account
• Discount Trading Account
• Full-Service Trading Account
• 2-in-1 Trading Account
• 3-in-1 Trading Account

Process of Opening a Trading Account

If you have completed the age of 18 years and are a resident of India, then opening a trading account for you is super easy. By following the below-mentioned 5-step process, you can begin your stock market journey towards building wealth.

Step 1: Selecting the broker

There are many different stock brokers offering services in India. You can pick one considering the features, charges, and quality of trading terminals offered by them.

Step 2: Gathering the necessary documents

You must gather a set of all the necessary documents like identity proof, address proof, income proof, bank statement, and a photograph that are required to be submitted with the selected broker.

Step 3: Filling application form and submit the documents

Fill in all the basic details about yourself like name, mobile number, address, gender, date of birth, occupation, PAN, etc. in the application form.

Step 4: Completing the KYC verification process

In this step, the broker verifies your identity using the e-KYC process. This is a mandatory process that ensures there is no misuse of your personal information and that the person opening a trading account is you.

Step 5: Adding funds to your account and start your journey

After successful verification, you will receive a username and password that can be used to log in to the trading terminal of your broker. You can simply add funds and begin trading.

Now that you know what an online trading account is, let us understand the advantages of using it.

Pros of Owning a Trading Account

In addition to offering a platform to buy and sell securities, there are many other benefits of owning a trading account. Some of them are:

• Historical comparison: All your historical trades are recorded and maintained in your trading account. It helps you compare your monthly, quarterly, and yearly progress.

• Conduct research: A lot of information about the companies and their price charts is available that you can use for research and financial planning.
• Net return earned: You can determine how much net return you have gained in a selected period after deducting the transaction cost.
• Convenience of trading: With an online trading account, you can place buy and sell orders yourself. Some brokers also offer Call & Trade services where you can place orders on a phone call.
• Track your investments: If you own some shares, then you can track them from your trading account and keep watch on the live profit and loss of your holdings.

The Bottom Line

A trading account is the primary access point from which you can place buy and sell orders. Thus, you must choose a broker that offers a feature-rich terminal. The smart choice would be to open an account on Ashika Group’s Dhanush platform.

Providing best-in-class services to 125,000+ happy clients, it is one of India’s largest financial platforms. It not only facilitates trading in securities but you can also invest in stocks, mutual funds, IPOs, and much more. Hurry up, open your Trading Account on Dhanush Today! Click here to learn more.