Trading Account Definition

Having a trading account lets you invest in stock markets seamlessly. But the question arises what is the meaning of a trading account? A trading account is a investing account enabling individuals or entities to buy and sell securities, facilitating investment activities. Think of it as a door to do money deals in the stock market.

A trading account is an essential tool that you must have if you want the entire process of share trading to be secure, convenient, and speedy. Here's everything you need to know about trading accounts, beginning with a what is trading account meaning.

Trading Account Meaning

A trading account is what you need to buy or sell equity shares in a stock market. It can be thought of as an online investment account that you need to purchase securities and monitor trades. There are many benefits of a trading account. Having a trading account allows investors to buy and sell securities like shares, foreign exchange, and commodities in the financial market. Your trading account can hold cash, securities, and any other holdings.

In the olden days of trading, the stock exchange functioned on the open outcry system in which traders used hand signals and verbally communicated their buying/selling decisions. Once the stock markets around the world moved to the electronic system, trading accounts quickly replaced this open outcry system. Now in the online method, traders do not need to be physically present at the stock exchange to place their orders for buying/selling. Instead, traders open a trading account, and each trading account has a unique trading ID that is used to carry out any online transactions.

How Does a Trading Account Work?

It is knowing how a trading account works will help you understand how it is different from other accounts, like a Demat account.

One of the most basic answers to what is a trading account is that it is a link between an investor's bank account and a Demat account. If an investor wants to purchase any shares, he needs to place the order through his trading account. This said transaction then goes for processing and approval to the stock exchange. Once executed, the required number of shares are credited into the trader's Demat account, and the proportionate amount gets charged to their bank account.

A similar type of process is followed when it comes to equity shares. For example, an investor places a sale order for 100 shares through their trading account. This order is sent for processing at the relevant stock exchange, and once the order is executed, the requisite number of shares get debited from the demand account, and the proportionate amount is credited to their bank account.

So basically, a trading account links an investor's Demat account and bank account. It is possible to place an order to purchase shares through this trading account. It is possible for an investor to open multiple trading accounts with different stock brokers for various purposes. Some of the most popular reasons why traders use their trading accounts include:

• Day trading activities
• Long term investment
• Education and health insurance planning
• Retirement savings

It is essential to keep in mind that in a trading account, only direct revenue and expenses are taken into account. Direct expenses are taken on the debit side, while direct revenue is taken on the credit side. No item from the past year is taken into account. If the credit side is seen to have a greater total than the debit side, the trader is said to have made a profit, and if it's the other way around, the trader makes a loss.

Types of Trading Accounts

There are two major types of trading accounts, regardless of whether you are a beginner or an investor. If you are looking for the best trading account for beginners or if you want the best trading platform, you will have to pick from these two types of trading accounts.

Standard or Securities Trading Account

This is the primary type of trading account that covers all the basic trading/investment requirements. A standard trading account lets you trade equity, futures and options, exchange mutual funds, currency futures, and exchange-traded funds (ETFs). This is the best trading account for investors who are short-term traders and want to make the best of a standard trading account for investing funds at a high frequency.

Commodity Trading Account

A commodity trading account is the best trading account for those who want to trade in commodities like crude oil, copper, silver, and gold. To have a commodity trading account, you need to open a trading account with a commodities broker, either an individual broker or a brokerage firm. A commodities broker is a trading member of a recognized commodity exchange. Your commodity trading account allows you to trade commodity futures, and there is no need to link it to your Demat account.

An important point to remember here is that you can only open one trading account with one broker. So if you want to open several trading accounts, you have to open them with multiple brokers.

Do You Need to Pay Trading Account Opening Fees?

For any trader, having a trading account is vital to ensure the smooth handling of their investments. Having trading accounts along with Demat accounts eliminates the need for lengthy paperwork, and you can easily carry out your investments without needing to leave the house.

You have to pay a nominal fee to open a trading account. However, this minimal trading account charge is worth paying for achieving the convenience of having all your shares, stocks, and bonds in one place. The exact trading account charges vary from broker to broker.

What Are The Advantages of Opening a Trading Account?

Your trading Account is your One-stop Access

There are multiple stock exchanges in India that trade in various commodities and securities. Some of these include the Bombay Stock Exchange (BSE), National Stock Exchange (NSE), Multi Commodity Exchange (MCX), etc. Having a trading account online provides you easy access to trade on all these exchanges from a common platform.

Effortless Transactions

Today, online banking and trading have made the entire investment process easier than ever before. Having a trading account makes it effortless for you to remain in a favourable position on your investments. You can save and invest conveniently and quickly from your online trading account.

Access to Reliable Information

Any trader knows that equity investing is about making the right decision at the right time. When you have an online trading account, you get access to valuable services that professionals in the industry prepare specially for traders. These resources let you make informed investment decisions in a fraction of the time. This increases the probability of earning higher returns on your investments.

Easier Access

Since most trading platforms are today online and app-based, you can easily access your account from your smartphone, laptop, and any other handheld device. With an online trading account, you have the flexibility to track your investments from anywhere and at any time.

How to Open a Trading Account?

Many brokers offer trading accounts. With so many options, it might not be easy to narrow down which is the best broker for your individual needs. You can open a trading account easily by following these simple steps:

• Choose a broker who has a good reputation in the market. The company should be genuine and reputable and have an excellent track record of providing a seamless trading system and profitable investment strategies.
  
• Find out the trading account opening charges beforehand. You can compare the brokerage rates of the major brokers in your area and inquire about any discounts available. Most brokerages give you a Demat and trading account together since a Demat account is mandatory for storing your securities.
  
• A representative of the broker firm will visit your home with an account opening form and collect your Know Your Customer (KYC) documents. KYC documents needed to open a trading account include proof of income, proof of identity, and proof of address. Many brokers also have an e-KYC process, in which you simply need to upload your proofs on their website and complete the KYC process.
  
• After the submission, the firm will verify your details either over the phone or an in-person visit will be carried out.
  
• Once your application gets processed, you will receive your trading account details. It usually takes around three to four days to activate your trading account once the verification process is done.

Why Choice Trading Account is Best for Beginners and Investors?

In your search for the best stock broker to open your trading account with, you will come across several names. However, none shines brighter than Choice Trading. So why should you open your trading account with Choice Trading? Let’s take a look.  

Choice Trading is a member of BSE, NSE, MCX, MSEI, and NCDEX along with being a depository participant with CDSL. Choice Trading Account is best for beginners and investors. The reasons are obvious, let us explain why:

Research & Advisory Services: Choice offers a dedicated research team that provides Technical and Fundamental Research at no extra cost, which is an excellent option for both beginners as well as professional investors.

Customer Support: We all are well aware of the importance of good customer support. In case of trading and investments, customer support from your broker can make all the difference in whether you earn a profit or make a loss. Choice has an excellent support team to guide you at every step available via phone and emails, and branch offices.

Local Offices: To provide excellent support to investors and beginners, Choice Trading is present at 48 local offices all over the country. This next level of customer assistance has made Choice one of the best trading accounts for beginners and investors.

25+ Years of Experience: In the trading industry, experience makes a huge difference. Choice has been a trusted name in the brokerage and finance industry for over 25+ years. They have built a strong reputation for themselves that spans across the country.

Whether you are a beginner or a professional investor, you must consider Choice as the best possible broker for opening your best trading account in India.

Wrapping Up

A trading account is an absolute necessity today for any investor. It is on par with a Demat account, and you cannot move ahead in the stock market if you do not have a trading account. And what's more, the online process for opening a trading account has gotten so simple now that it is now more lucrative than ever before to jump onto this bandwagon and become a part of the booming stock and commodity markets.

In this article, we tried to cover the definition of a trading account along with some of the basics you need to know about having a trading account. So without any further delay, head over to Choice and open your online trading account today.