Trading Account And Its Types In India – The Ultimate Guide

Before the advent of online trading, stockbrokers were in charge of placing buy and sell orders on behalf of their clients. However, investors can now buy and sell orders at their discretion. The client’s stockbroking software automatically relays the client’s demands to the exchange.

But you should note that it is essential to open a Demat account online along with a trading account to trade. Read the blog to learn more about trading accounts and the types of trading accounts in India.

What is a Trading Account?

A trading account is a type of investment account that helps in executing transactions for securities, stocks, etc. A trading account is a day trader’s main account. Because of their propensity to frequently acquire and sell assets, usually during the same trading session, these investors’ accounts are subject to specific regulations. Assets that may be part of a long-term buy-and-hold plan are kept apart from those that are held in a trading account.

Types of Trading Accounts – All You Need to Know

Equity Trading Account

It enables investors to trade in stocks and options. Traders have the opportunity to trade currency derivatives using their current trading accounts. You need more funds in the equities trading account to receive the stocks. If you accept their delivery, you will require a Demat account to store shares. However, since futures and options do not require delivery, a trading account is adequate if all of your trading’s are in these instruments.

Derivatives Account

This type of trading account allows users to trade in futures and options (F&O) contracts. When trading only in the F&O segment, it does not need a demat account to be linked by the user. One can get this enabled if you wish to start trading in derivatives. 

Commodity Trading Account

The commodity market depends heavily on commodity trading accounts. However, if an investor wants to begin trading in commodities, he must open a commodity trading account. This sort of trading account is opened with an authorized commodity broker and a reputable commodity exchange in India.

Online and Offline Trading Accounts

Online trading accounts are accessible through the internet and allow investors to buy and sell securities without needing a physical broker. On the other hand, offline trading accounts require a broker’s assistance to execute trades and are typically conducted via phone or in-person meetings. Online trading accounts, as the name implies, offer the option of trading through a program that communicates with the brokerage over the internet.

Two-in-one and three-in-one accounts 

You need three different sorts of accounts to trade in the stock market:

• Trading account
• Bank account
• Demat account 

The trading account will require a money transfer from your bank account. Once you have funds, you can purchase shares using the trading account that will be kept in the Demat account. A 2-in-1 account, which some brokerages offer, combines a trading and Demat account and streamlines purchasing, selling, and transferring shares to the Demat account. The 3-in-1 account takes things further by providing an integrated trading, bank, and Demat account. A 3-in-1 account allows for the ease in transfer of both money and shares.

The Bottom Line

We hope the article can give you a deep understanding of the trading accounts and the types of trading account that exist in India. Now, you can opt for a trading account that best suits your financial goals and risk tolerance. However, ensure that before funding your account or buying stocks, you have a clear-cut strategy to help you make informed decisions. If you want to open a Demat account online, get in touch with a financial advisor or a professional broker.