Investing in the stock market has been a key means of earning income for many people in recent years. The number of people investing in the stock market is steadily increasing. In the initial step of investing in the equity markets, you must first understand the significance of an online Demat Account and a trading account.
A trading account is comparable to your bank account, where you can keep your financial assets, such as bonds and stocks. It’s used to place purchase/sell orders on the equity markets. Investment enthusiasts can nowadays open an online trading account with their respective brokers. This article will describe the many types of trading accounts available in India.
Types of trading account
Following are the different classifications in which various distinct types of trading accounts are available for trading –
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BASED ON TYPE OF ENTITY
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Trading account for margin trading
There is a margin of risk associated with this because if the stocks you purchased fall in value, your broker would contact you and ask you to deliver the securities or money to the account. They may sell your securities to make up for the loss. A Margin Account allows a client to take funds on loan from their broker to trade. This offers them an advantage over only individual funding because they can now buy additional securities.
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Trading account for cash trading
The client owns all of the funds and securities in a cash account, and they cannot take funds as loans from their brokers to complete deals. With a Cash Account, the client must pay for any securities purchased.
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Trading account for commodity trading
Previously, commodity and stock regulators were independent, but commodities trading was placed under SEBI jurisdiction a few years ago. The commodities market is where main products are traded rather than manufactured goods. The equity account that facilitates the purchase and sale of such primary economic products (such as agricultural produce, metals, silver, oil, and so on) is known as a trading account for commodity trading.
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Trading account for equity and derivatives trading
This type of account is opened with a stock exchange trading member. A derivative is a contract in which the value is determined by another agreed-upon monitory security or property.
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Trading account for options trading
This type of account can only be opened if the broker feels that the investor’s net worth is consequential. A contract that offers the equity-seller/purchaser the option to trade/purchase a security at a specific rate and time is known as a trading account for trading options.
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Trading account for share trading
This account cannot be used to make any other trades rather than trading in shares. The purchase and sale of shares are easier with a trading account for share trading.
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BASED ON MODES
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Trading account in offline mode
If a trader wants to conduct trading offline, he can do so by contacting a reputable stockbroker. Another option is to go to the broker’s office and open it in person. On the other hand, the offline method is more frantic and time-consuming.
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Trading account in online mode
In online trading, the trader must decide, and all of the needed transactions will be completed by utilizing trading software developed by a reputable stock broking firm or an online trading app to open an Online Trading Account.
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BASED ON FUNCTIONAL TYPES
A trader will require three distinct types of accounts to begin trading in the Indian stock market:
- Bank Account
- Depository Account
- Trading Account
A trader must first transfer funds from his bank account to his online trading account, which they can then use to buy or sell stocks through the trading account. However, all of the shares purchased will be held in a safe and secure Demat account.
Two-in-one trading accounts
Only a few brokerages provide a two-in-one trading account that combines the Demat and the trading account. When shares are purchased, the fundamental aim of a 2-in-1 trading account is to facilitate a quick and seamless transfer of shares from trading to the Demat account.
Three-in-one trading accounts
The 3-in-1 trading account goes above and beyond the 2-in-1 trading account by allowing you to integrate banking services with your trading and Demat account. Several brokerage services provide 3-in-1 accounts to facilitate secure transactions and fund transfers between accounts.
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ADDITIONAL CATEGORIZATION
Additionally, the Trading Accounts can be classified as the following –
Trading account with full service
Investors can save time by using a full-service investment service to analyze the marketplace trading decisions. A full-service account, as opposed to a cheap broking account, provides a broader range of trading options. They might use several integrated analysis tools to stay on top of the latest market-oriented trends and make sound decisions depending on the findings. When an investor cannot make trading decisions, he may seek financial assistance and valuable guidance.
An account with a discount brokerage
Discount brokerage account brokers offer call and trade services but no offline investing. A discount broking account is a standard trading account with no additional benefits. Trading activities can be carried out by an investor who has a discount broking account. Because traders trade in enormous numbers at a low cost, such traders are costly for investors.
Conclusion
To engage in equity markets and generate a higher income, you should have an online investment account. After thoroughly understanding the various trading and investment accounts accessible in India, one should thoroughly examine and decide which type of account is best relevant to the user and suits their interests.
To avoid hardships and keep their account safe and protected, an investor or trader should opt for an online trading account with a reputable brokerage firm.
