Excited to start your stock trading account?
As you explore stock trading as a financial opportunity, the market complexities await you.
Choosing the right stock trading account is the first complexity that you need to deal with. There are many types of trading accounts, and these accounts serve as your gateway to buying and selling stocks.
They provide essential tools and platforms to execute your investment strategies. Each plays a unique role in shaping your trading experience.
In the blog, we will explore the various types of accounts that pave the way to unlocking the potential of the stock market.
Traditionally, two accounts are essential for stock trading: the Trading Account and the Demat Account. The Trading Account enables buying and selling securities through an exchange. On the other hand, the Demat Account stores shares and securities in a dematerialised format. These accounts differ in the types of securities you can trade. Let’s delve into their details:
A trading account is a unique type of account that serves as a repository for various financial assets, like equities and derivatives. It is different from other accounts in significant ways. Its sole purpose is to help investors buy and sell shares within a single trading day.
You can open a trading account by choosing a registered stockbroker affiliated with recognised exchanges like the National Stock Exchange or the Bombay Stock Exchange. With this account, you gain the ability to trade equity shares and derivatives both online and offline.
A discount trading account offers minimal brokerage charges, which makes it ideal for beginners entering the market. These accounts usually lack additional services, like advisory and research. If you seek such benefits, a full-service trading account is necessary.
A commodity trading account enables the buying and selling of commodities. These accounts are established with commodity brokers registered with Indian exchanges like the Multi Commodity Exchange (MCX) and the National Commodities and Derivatives Exchange (NCDEX). Once opened, you can trade commodities similar to equity trading.
A full-service trading account provides not just buying and selling of securities but also additional services like financial advisory and market research. However, it's important to note that the associated costs are higher than a discount trading account.
Demat derived from ‘dematerialised,' indicating that securities held in a Demat account are in electronic form. It makes them easily accessible and safer. Before the introduction of Demat accounts in 1996, traders had to deal with physical copies of trades, leading to tedious processes and lower trading frequency. The different types of Demat accounts have transformed trading into a seamless and accessible experience today.
Repatriable Account enables non-resident Indians to trade Indian securities. With the help of this account, they can transfer the funds abroad. To access this account type, you need to be associated with a Non-Resident External (NRE) bank account.
Since funds cannot be transferred abroad through a general Demat account, non-resident Indians are advised to consider a non-repatriable Demat account. If you want to use this account, you need to be associated with a Non-Resident Ordinary Account bank account.
This Demat account applies to individuals residing in India.
Having a trading account is a crucial gateway for investors and traders to access stock markets and maximise their potential profits. Once equipped with knowledge about the various types of trading accounts, you need to give careful thought and consideration to determine the most suitable types of accounts. It would be best if you were imperative enough to select a trustworthy brokerage firm that ensures a seamless and secure trading experience. This way, you can embark on your trading journey with confidence, safeguarding your investments and paving the way for financial success.