Similar to a bank account, a trading account acts as a common platform to sell or purchase securities. Securities are purchased through a trading account, held by opening a Demat account, and payments are done through the linked bank account.
Importance of Trading Account
An online trading account helps you trade financial instruments through the internet. You can execute buy/sell orders at the click of a mouse. It is easy to set up, and offers telephonic and online access. It contains a wealth of information about your trading details. Hence, you can make financially sound decisions to increase profitability. Such an account provides information on gross profit and loss. It also increases the speed of the execution and settlement of trade orders. You can also make as many or as few trades as you desire. Moreover, the cost of online trading is lower compared to traditional physical trading.
Types of Trading Account
There are many types of online accounts available for the purpose of trading securities, stock, gold, ETF’s, currencies, etc. These include Online Forex Trading account, Online Commodities Trading account, Online Currency Trading account, Online Equity Trading account and Online Derivatives Trading account. A Forex account is one which holds deposits in one or more currencies for the purpose of speculation of movement in the foreign exchange market. The commodities market is similar to that of a stock market, except that goods are traded instead of stocks. An online equity account allows you to invest in IPOs, equity, mutual funds and currency derivative instruments. Derivative accounts help make profits by betting on the future value of an underlying asset like currencies, stocks, exchange rates, etc.
Features & Benefits
Online trading account offers feasibility to investors as it is simple, stable and fast to deploy. It enables investors to track movements of tradable assets and securities on a real-time basis. You can have multiple accounts based on your trading strategies. Some may have a trading account for buying and selling long-term stocks, retirement savings, margin accounts, etc. It enables you to set your own personal trading limits and buy/sell orders as per your convenience. An online trading account also reflects the ratio between the cost of goods sold and the gross profit. It also gives you a gist of your transactions, gives you real-time quotes, and provides research tools and technical analysis, thus enabling you to make better trading decisions.
The main benefit of an online trading account is the ease with which you can manage your stock portfolios without middlemen/brokers. It also gives you greater control to trust your own intuitions and take risks with your investments. Besides, the speed of transactions increases as everything can be done instantaneously. In a traditional set-up, one had to contact his stockbroker, who would then negotiate the price with the trader and place the order. This would often result in transaction delays. Online trading eliminates such issues. You can also monitor your stock as and when you wish, analyse research reports, read finance news and trade even when you are on the go.
Am I eligible to open trading account?
Any individual can open a trading account as long as he has an identity proof and address proof. These documents are necessary while opening a trading and a Demat account. You can provide your voter’s ID, PAN card, driver’s license, passport or bills as identity proof. As proof of address, ration card, driving license, bank passbook, voter’s ID, electricity bill, telephone bill, etc. can be submitted. You should also have a savings account as it is needed to transfer/receive money when you buy/sell shares through your trading account. It is advisable to open a trading account once you are well versed with the fundamentals of trading.