Most newbies in the stock market remain confused about trading accounts as they don’t understand difference between trading and demat account. To clear the concept of trading account, Let’s discuss what is a trading account and how does it work?
Table of Contents
What is trading account?
Trading account meaning is an account in which the money of the investor or trader is deposited. This trading account is linked to the stock exchanges, demat account and bank account of the investor or trader.
Due to this after buying the shares, the shares get deposited in the Demat account and the amount is debited from the trading account.
Similarly on selling the shares, the shares are debited from the Demat Account and money will be credited in the trading account.
Trading accounts quickly overtook the open uproar system of the stock market once the stock exchanges introduced the digital platform. Buyers and sellers do not need to be actually onsite at the stock market to make orders using the online platform.
How Does It Work?
A trading account serves as a link between an individual’s demat account and bank account. It makes an order through your trading account when you wish to purchase stocks. The aforementioned transaction will be processed at the stock exchange.
The appropriate number of stocks are deposited to your demat account upon execution, and the amount is deducted from your bank account.
When selling equity stocks, a similar procedure is followed. With the assistance of your trading account, you may make a sale order.
It is sent to the appropriate stock exchange for confirmation. The appropriate number of stocks are deducted from your demat account and a total payment is deposited to your bank account after the order is completed.
Advantages of Trading Account
After understanding what is a trading account, let’s check out its advantages. These are major advantages of Trading Account:
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Stock Market just one click way
In India, you may find a variety of exchanges that trade various assets and commodities. National Stock Exchange (NSE), Bombay Stock Exchange (BSE), National Commodity and Derivatives Exchange (NCDEX), and Multi Commodity Exchange (MCX) are among the most well known exchanges .
All of these exchanges may be accessed through a single platform if you have an online trading account. Wealth may now be created with a tap of a button.
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Right Decisions
It’s all about making the correct decision at the appropriate moment when it comes to equity investment. Online trading platforms provide essential services such as research papers written by qualified and experienced experts. Investors can use the reports to make well-informed investing decisions. In the end, there’s a better chance of making more money.
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Technical Help
Trained executives engaged by online trading platforms give individualised help to clients 24 hours a day, 7 days a week. It might be a technical problem or another issue with the trading platform.
Alerts may also be set up through SMS or email to get notifications about the purchase and sell targets.
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Easy to use
It is now possible to use a computer, mobile, or other hand-held gadget to access trading platforms that have become app-based. Online trading has given people the ability to track their assets from anywhere and at any time.
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Fast Trades
The process of transferring funds and conducting equities trading has become easier thanks to online trading. Clients are in a better position to save and invest simply and easily thanks to improved technologies.
Disadvantages of Trading account
Here are the few Disadvantages of trading account:
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Frauds Brokers
Many small brokers can do many types of online frauds with clients like selling their stocks or pledging their stocks without client permissions. However, SEBI is trying to reduce these things but they are still happening with retail investors.
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Long term Investing is difficult
It is just a click away so mostly people check it again and again which ruins their long term plans. People sell their long term bets when they hear about small corrections in the market.
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Technicality
There are many passwords and OTB is required to sell any investment. Due to which sometimes people miss profit opportunities as it takes too long to clear the process of passwords and OTB.
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Cost
There are many costs attached to it like STT, Annual maintenance, Brokerage charges etc. These all charges make things difficult for a small investor.
After understanding what is a trading account with it’s pros and cons. Let’s take a look at document required for trading acccount.
Documents required for Trading Account
The Trading Account serves as a link between the investor’s Demat Account and their savings account. Throughout firms, the method for creating a trading account and the necessary paperwork is the same.
Check that any document with an expiration date is still valid on the submission date before submitting it. Here’s a complete list of the documents you’ll require to create a trading account:
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Income Documents
You can summit any one of the as a proof of your income:
- A printout of the Acknowledgement Slip for the Income Tax Return (ITR) filed to the Income Tax Department during tax filing.
- A printout of the yearly statement of accounts verified by a Chartered Accountant or a certificate of net worth.
- Form 16 or the current month’s salary slip
- The most recent bank account statement, which includes the revenue history for the previous six months.
- Any documentation proving asset ownership by self-declaration.
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ID Proof
You can use any of these to validate your identity.
- A legitimate picture is required on the PAN card.
- Aadhaar card, voter ID card, driver’s licence, and passport are all acceptable forms of identification.
- Central/State Government and its Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, Public Financial Institutions, University affiliated Colleges, Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council, and Credit/Debit cards issued by Banks all issue identity cards with the individual’s photo.
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Address Proof
You may use any of the following as evidence of address:
- Passport/Voters Identification Card/Ration Card/Registered Residential Lease or Sale Agreement/Driving License/Flat Maintenance Bill/Insurance Copy.
- Utility bills that are less than three months old, such as landline phone bills and electricity/gas bills.
- A bank passbook that is no more than three months old is required.
- Judges of the High Court and Supreme Court self-declare their new addresses.
- Address evidence from bank management of Scheduled Commercial Banks/Scheduled Co-Operative Banks/Multinational Foreign Banks, Gazetted Officer / Notary public, Member of Legislative Assembly, Member of Parliament
- Proof of residence in the name of the spouse.
Process of Opening a Trading Account
After understand what is a trading account and it’s pros and cons, let’s check out the process of opening a trading account. You must first create an online trading account with a brokerage firm in order to undertake equities trading online. The stockbroker may find it difficult to provide you personal attention across hundreds of clients.
Having a trading account makes the entire investment process much easier. Completing these procedures will allow you to open a trading account:
Steps
- Choose a broker with a solid track record of promptly processing orders like Zerodha.
- To process your orders, each broker charges a fee. As a result, it is preferable to make a fair comparison of brokerage prices.
- Locate a stockbroker and inquire about the process for opening a trading account.
- An account opening form and a Know Your Client (KYC) form will be delivered to your home by a firm representative.
- You must complete these two forms and submit the necessary papers.
- Following your submission, the business will verify your personal information either in person or over the phone.
- After your application has been validated, you will be given access to the trading account.
Conclusion
Stock brokers like Zerodha and Upstox can open your demat account online without any visit just with a mobile number linked with aadhar, pan card and aadhar card in just a few seconds.
This is all from our side regarding What is a trading account? Although, if you have any doubts about whats a trading account? you can just comment below.
Other Interesting blogs related to What is a trading account?
Difference Between Demat and Trading Account
How to Invest in Mutual Funds without Demat Account
FAQ About the Trading Account Definition
What is Trading Account in Hindi?
ट्रेडिंग खाता एक ऐसा खाता है जिसमें निवेशक या व्यापारी का पैसा जमा किया जाता है। यह ट्रेडिंग अकाउंट निवेशक या ट्रेडर के डीमैट अकाउंट, बैंक अकाउंट और स्टॉक एक्सचेंज से जुड़ा होता है। इससे शेयर खरीदने के बाद शेयर डीमैट खाते में जमा हो जाते हैं और ट्रेडिंग खाते से राशि डेबिट हो जाती है। इसी तरह शेयरों को बेचने पर डीमैट खाते से शेयर डेबिट हो जाते हैं और पैसा ट्रेडिंग खाते में जमा हो जाता है।
What is trading account in India?
Trading Account in India is an account in which the money of the investor or trader is deposited. This trading account is linked to the stock exchanges, demat account and bank account of the investor or trader. Due to this after buying the shares, the shares get deposited in the Demat account and the amount is debited from the trading account. Similarly on selling the shares, the shares are debited from the Demat Account and money will be credited in the trading account.
Trading account is which type of account
Trading account is an investment account.
Best trading account ?
The trading accounts Zerodha and Upstox are the best trading accounts.
What is trading account and Demat account?
Equities, bonds, mutual funds, Exchange Traded Funds (ETFs), and other assets are held in a demat account. A trading account is used to purchase and sell stocks on the stock exchange. To trade, it must be connected to a bank and a demat account.
