Trading Account

Trading Account Basics

A trading account is a golden opportunity that can easily take you to the heights. It mingles all the advantages of bestowing you with refresh stock trading experience and benefits you with the best returns at a moment’s notice if you have deep insights into the market. It carries all cash, securities and other holdings of an investor. The investors can buy & sell securities anytime anywhere through a trading account. It holds the securities and permits for exchange of securities. It’s easy to get it opened by consulting a broker.

Reason you need a Trading Account

Reasons are infinite to open a trading account. It will start your journey to the share market. The major reasons are:

  • A trading account can seize all the best opportunities for you and mingle up the extreme benefits at every step. It’s imperative to have a trading account as it will help to put trades in varied options. You can fetch the lucrative options anytime you want, by having an accurate account with yourself.
  • It’s a bridge between the bank account and Demat account. The securities purchased by the investors will be added in the Demat account and on the same time amount will be deducted from the bank account. The instructions are all navigated to Demat and bank account through the trading account.
  • For the purchase and sale of securities & IPO shares, trading account plays a vital role. The securities purchased by you are credited and sold by you are debited from the Demat account. This all required a trading account. Without it, debit & credit of securities to Demat account is not possible.
  • The trading account bestows the investors with forecasts and insightful experience. By keeping yourself updated with share market forecasts, you can do profitable trading and excel in it by earning abundantly.
  • You get instant and reliable information by having a trading account. You can get access to research reports and even take the help of professionals for the best results. It raises the probability of higher returns.

Benefits of having a Trading Account

Trading account is your flow book. It enables you to record buy and sell transactions in the flow book and then these transactions are either squared off or they are taken to delivery. Here are 5 benefits of having a trading account.
  • Under the extant SEBI regulations, you cannot execute transactions in equity, futures or options without a trading account. This is also true of transactions in currency derivatives. All transactions have to be necessarily routed through the trading account only.
  • Trading account enables you to sell your IPO allotment shares. If you do not have a trading account then you will have to continue to hold on to the shares and cannot sell the shares. In the process you may lose out on good profit booking opportunities.
  • Trading account is also essential to differentiate your delivery and non-delivery trades which are done on a net basis. This enables you to easily distinguish which helps in quite clearing and settlement of trades during the day.
  • Since futures and options positions cannot be held in demat custody due to the absence of ownership title, these contracts are actually held in the trading account only. This facilitates the buying and selling of these F&O contracts in the trading account.
  • Above all, the trading account acts as the gateway to your long term investments in equity. It is only equities that can generate wealth in the long term and for that the trading account is the gateway to your future.

Steps to open a Trading Account

  • Mobile & PAN Verification: For the statutory compliance all you need to do is verify your mobile with an OTP and upload a clear image of your PAN card for it to automatically verifies your details.
  • Personal Details: This step helps us to know you better. Details about yourself and your family history would help our team to provide you with a personalised brokerage plan and stock recommendations.
  • Bank Details: We want to ensure that you receive your earned money in your bank account only, please help us get the right details.
  • Payment & Consent: Depending on the volume of transaction you want to do on regular basis you can choose the Plan and Service which suits you best.
  • Upload Proofs & IPV: The next step is IPV (In Person Verification) which is mandatory. Just create or upload a small 15 seconds video of yourself for this 2-step verification process and making your account more secure.
  • Review & Confirm: The last thing is to just review all the details you have filled and confirm to start trading with us. You must sign the agreement with the DP. It is as simple as it can get.

Difference between Trading Account and Demat Account

Trading Account
  • Trading account is the transaction account where buy and sell transactions are executed in the stock markets.
  • Trading account is a flow statement and therefore the trading account transactions are always expressed over a period of time which could be a month, quarter or year.
  • Trading accounts can accept margins from the bank account and send shares to the demat account for credit via clearing and settlement.
  • Trading account can execute transactions in equities, stock futures, stock options, index futures, and index options and also in currency derivatives.
  • Can a person only have a trading account? Yes if he only intends to trade in futures, options or currency derivatives then demat account is not required.
  • you will need a trading account to sell these shares received.
Demat Account
  • Demat account is the account that holds shares in custody and it is a statement of ownership.
  • Demat account being a stock statement is always viewed at a particular point of time like quarter end or year end.
  • Demat account can only hold in custody where ownership is possible like in the case of equities, mutual funds, bonds, ETFs etc.
  • Demat account can only hold in custody where ownership is possible like in the case of equities, mutual funds, bonds, ETFs etc.
  • But for trading in equities, even if be intraday, you will require a demat account and that is a SEBI stipulation.
  • Person have a demat account without having a trading account. That is possible in case you are getting direct of IPO shares or when you are getting shares as gift by offline transfer.

Guide for beginners Trading Account

As a beginner you need to understand a basic thing that intraday trading is not about get-rich quick strategies. It is about managing news flows and charts within the parameters of risk. Here is a basic guide to intraday trading for beginners.

  • Choose your stocks carefully. Avoid stocks that are too speculative and also avoid stocks that hardly show any movement. It is hard to make money in intraday trading in either of them.
  • Time your entry and exit properly. You have just around 4-5 hours of leeway time within which you need to see movement and profitability. That is only possible by proper timing.
  • Set stop losses. You cannot trade intraday without appropriate stop losses; else you are likely to be wiped out. Also set profit targets for constant churning.
  • Set limits of how much you are willing to lose in a trade, in a day and overall as percentage of capital. Also have a clear plan on the conditions when you will avoid trading.
  • Respect the market trend. As an intraday trader, never try to either outsmart or outguess the market. Contrarian approaches don’t work. Understand the underlying trend and trade accordingly.
  • Constantly review and introspect at the end of the day where you went right and where you went wrong. Be absolutely honest with yourself as that is the only way to get to the crux of any problem, especially in intraday trading.