What Is a Trading Account, Types and Benefits?

What is a Trading Account? 

A trading account is used to buy and sell equity shares in a stock market. Before the online introduction for trading, the stock exchange functioned on the open outcry system. 

Previously in this system, the traders used hand signals and verbal communication to convey their buying/selling decisions. After the stock market worked electronically, this accounts replaced the open outcry system. In short, the investors or the trader don't have to be physically present. Instead, they have to open an account with the desired stockbroking firm. From the account, the stockbroking company conducts the trade on the exchange. Every trading account comes with a unique user ID that helps in online transactions.  

How does a Trading Account work?

A trading account acts as a link between the Demat account and the investor's bank account. If an investor seeks to trade, i.e., buying the stocks, he places an order in the trading account. The process is held in the stock exchange. Once the trade is executed, the shares are credited to the Demat account, and the amount is debited from the bank account. 

Similarly, in the selling order of the equity shares, the investor places the sell order; for example, it is around 100 shares with the help of the this. Then the process is held in the stock exchange. Once the order is executed, the shares are debited from the Demat account and credited to the bank account. 

What are the advantages of a Trading Account?

One-point Access

One can easily access the multiple exchange segments and trade in securities and commodities using the trading account. The leading exchanges in India are National Stock Exchange (NSE), Bombay Stock Exchange (BSE), National Commodity and Derivatives Exchange (NCDEX), and Multi Commodity Exchange (MCX). This Account helps in enabling access to all the exchanges through a common platform. The wealth creation is one click away.  

Reliable information

Investing in equity is all about the right decision-making at the right time. The online trading platform provides extended research reports prepared by experienced and knowledgeable professionals. These reports help investors make informed investment decisions, which can probably help earn higher returns.

Notifications and customization

The trading platform hires a trained executive who comes forward if the investor faces technical issues or other difficulty handling the trading platform. Moreover, the platform sends constant alerts through email and SMS to inform about the buy and sell targets.

Flexibility

Everything tuning online made it more feasible and seamless to access the trading with the help of laptops, smartphones, and other hand-held devices. Moreover, online trading has helped keep track of investments from anywhere and at any point in time.

Seamless Transactions

Online trading made the whole process of fund transfer has made the procedure of fund transfer and conducting equity trading very seamless. Using advanced technology, the client can save and invest conveniently and easily.

Types of Trading Account 

Equity Trading Account

Talking about an equity trading account helps traders invest in stocks, futures, and options trading. Traders can also deal in currency derivatives by using their existing trading accounts.

However, an equity account cannot be used to subscribe for an Initial Public Offering (IPO), trade-in commodities, or take the stocks' delivery.

A demat account is also required if a person subscribes to an IPO or takes the delivery to store them.

An existing or new trading account is enough if a person is looking to invest in the future or trade options. Delivery is not involved in options and the future.

Commodity Trading Account

Commodity trading accounts play an important role in the commodity market. If you want to invest in the commodity, you need a commodity trading account. Working in commodities is similar to trading in equities; the trading account is opened with a registered commodity broker and recognized commodity exchange in India.

There are the two popular exchanges in India, stated below:

• The Multi Commodity Exchange (MCX)
• The National Commodity and Derivatives Exchange (NCDEX)

Earlier, the regulator was different to check commodities and equities, but commodities trading was taken under the Security Exchange Board of India (SEBI) regulation a few years back.

Offline & Online Trading Accounts

Another one is an account for traders who are looking to trade offline. This can be either done by calling the stock broker or physically placing the order at the stock broking firm. The offline process is quite hectic and time-consuming compared to the online one. 

On the other hand, the trader's online trading account needs to place the call, and the process will be executed with the help of this account software built by a reliable stockbroking firm or by using a mobile trading app.

A trader does not have to be physically present, and the process is quite convenient and hassle-free. The major benefit of trading online is you can place orders while sitting in comfort. 

2-in-1 and 3-in-1 Trading Accounts

To start in the stock market, one needs to have three accounts; here is the list of all three accounts: 

1) Bank account

2) Demat account

3) Trading account

You can easily execute a trade when you have three interlinked accounts interlinked. A trading account works as a mediator between two accounts. A demat account holds the securities; on the other hand bank account is used for all the money transactions, and a trading account is used to buy and sell securities in the share market.

Some brokerage firms offer a 2-in-1 account that integrates only with Demat and the trading account. The account's main purpose is to ensure that the fast and seamless transfer is carried forward. 

On the other hand, a 3-in-1 account goes one step ahead of the 2-in-1 trading account, and it gives an additional benefit of integrating banking services with trading and Demat accounts. You can open the best demat account in India with top stock brokers like Zerodha, 5paisa, Upstox, AngelOne, Motilal Oswal, Choice broking, And Edelweiss with us and start investing in Share Market

This ensures safe transactions and transfers funds from one account to another. Although this is not the major benefit as the brokers do allow the seamless transaction of the funds when trade is executed through the registered banking account. 

Discount Broking Account

A discount broking account is a normal trading account that does not have any additional services. The broker who offers the discount broking Brokers deals in discount broking accounts that offer call and trade facilities, and they don't offer offline trading. 

Usually, these traders are expensive for investors because they trade high volumes at a very low cost. Moreover, an investor can execute transactions if he has a discount broking account.

This is mostly has low brokerage charges as operating costs are relatively low than other trading accounts. They do not offer extra services like financial advice or research service for their customers.

Full-Service Trading Account

A full-service trading account offers several types of services compared to a discount broking account. They provide various opportunities for the investors, such as using advisory services and taking financial advice when they cannot make trading decisions independently.

Moreover, they offer multiple integrated research tools to keep an eye on current market trends. 

Note - You can read our latest article about "A Guide to Become a Sub Broker in India"

Conclusion 

In conclusion, this article covers everything you need to know about the Trading account. This is used to buy and sell of stocks in the stock market. It also acts as the mediator between the demat account and the bank account. For more information, you can read about the trading application read the article Best Trading Apps in India.