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Factors To Consider While Opening A Trading Account Online

30 Oct 2023

In most cases, a trading account is sold rather than being bought. People open a trading account with a broker they are familiar with or where the office is available in close proximity. Have you wondered if you need to go beyond a very mundane approach? What to look for when opening a trading account? What are the things to know before opening a trading account online in India? The overall process of opening a trading in India is quite simple (normally is trading cum demat account). However, there are factors you can consider before opening a trading that will help you to fine tune your choice further. Here is a 10 point matrix.

10 factors to consider when opening a trading account online

While a trading account opening appears to be a very simple and straight forward process, there is a much bigger logic to it. You can consider the following 10 parameters prior to account opening.

Check if the broker is offering an online trading and call n trade facility. Of course, there is nothing special about an online trading facility but you need to take a dummy login and check that it works fine. Also do some channel checks and also talk to other customers. Despite the best of efforts, internet connections have been quite volatile in India. Insist that the broker also offers you a call n trade facility as a back-up.

What is the trading leverage permitted by the broker? This is useful when you are trading intraday or in futures. The greater the leverage you get the better it is for you as you can churn your capital more rapidly. The answer lies in rolling your margin around. Of course, a high leverage cannot be overused and create risks along the way.

Does the online trading account interface seamlessly with DP and bank account? That will depend on whether your trading account is a 2-in-1 account or whether it is a 3-in-1 account. More importantly, ensure that the process of funds and shares takes place seamlessly.

Market reputation of the broker also matters a lot. Don’t just go by volumes done by the broker or the brokerage charged. Look at aspects like the service standard of the broker, complaint redressal, timely payments etc. On such issues, the market feedback is rarely wrong.

Transaction costs for different products also need to be checked. We are not just talking about the brokerage charges but you need to calculate your break even in intraday and delivery trading after considering the brokerage costs and the statutory costs in totality. Ensure that your profit calculations factor in the apparent costs and the hidden costs too.

Check if the broker provides you with mobile support. Does the broker have a mobile app that helps you to trade on the web with using your computer? Also check if your broker provides you with the requisite mobile alerts and other facilities to keep you updated on the market and also on your portfolio execution status.

Trading account opening and trading process should not be too tedious. Nowadays it is possible to open your trading account entirely online using your Aadhar card as an authentication tool. Even otherwise, ensure that your entire process from vetting to approval does not take more than 2-3 days. Even in the normal course of things, the DP debits and credits should happen on time with any reminders.

Research reports provided by the broker are also a key input for the process. Brokers will give you a lot of research inputs like news alerts, colour of flows, trading calls, investment ideas etc. The final onus is on you whether to take the call or not but it is always preferable to opt for a broker who provides you with research support that is backed with solid data and analysis.

Does your trading account also entitle you to trade with the assistance of Analytics and screeners? These screeners are online filters which allow you to shortlist stocks based on some fixed criteria. For example, you can screen stocks that have high dividend yields or low P/E ratio or high turnover ratios etc. These are a value addition provided by brokers and works as a Do-it-yourself approach to investing.

What happens if you get stuck in positions? This happens so very often. You buy a front line stock like Titan and the stock corrects 15% from those levels. You may be still convinced about the stock but a good broker will advise you in these circumstances. Do you need to keep a stop loss, should you hedge with put options, should you reduce your cost by selling higher call options, should you restructure your portfolio and shift to other sectors etc? That is what advisory support is all about.

A trading account is not just a platform for executing transactions but it is a complete ecosystem for you to identify stocks and also benefit from the combined experience of research. This is the starting point and so you must ensure that it is properly thought through.

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