Types of Trading Accounts in India
Consider your trading account as a counterpart to your regular bank account. While your bank account holds your cash, your trading account holds your bonds, shares, and other financial securities.
It’s like your ultimate pass to the stock market, making buying or selling securities as easy as online shopping — broadly speaking.
As a trader in India, you have access to a vast array of options; however, that means you might even feel overwhelmed by the sheer variety available.
Each of these account types is tailored to the unique functionalities it offers. We’ll go over what to expect with each type so that you can decide what works best for you.
Types of Trading Accounts in India
Traders and investors in India have a wide range of trading accounts to pick from. Each type of trading account is designed to cater to distinct investment goals and objectives.
Now, let’s dive into some of the most commonly preferred types of trading accounts in India:
Note: several Indian trading platforms, including but not limited to Zerodha, Upstox, Angel One, TradePlus Online, FYERS, and Sharekhan, offer many, if not all, of the following trading account varieties.
First up, we have the most fundamental trading account type, known as the Equity trading account. This account is your ticket to trading in futures, options, and stocks.
However, the equity trading account is just one piece of the puzzle. If you’re looking to invest in IPOs or take delivery of shares, you’ll also need an attached Demat account . This basic equity trading account is all you need to trade options and futures.
Even though intraday trading doesn’t require delivery, given that it involves trading in equities, the Securities and Exchange Board of India (SEBI) mandates the presence of a Demat account. The equity trading account can be further broken down into two categories: the cash account and the margin account.
The cash account is all about trades where upfront cash payment is made. This is strictly for delivery and requires full payment.
Conversely, the margin account gives you the flexibility to hold intraday positions by putting down a minimal margin. It even empowers you to buy or sell in futures and options, provided you pay the required margins.
This type of account comes in handy when you’re borrowing from the broker to invest. One example of an equity trading account in India is the Zerodha Trading Account. Zerodha is a leading discount brokerage firm that provides a user-friendly online platform for equity trading.
Commodity Trading Accounts
A Commodity Trading account is an account you set up with a Trading Member (also known as a Commodity Broker) of a recognized Commodity Exchange (such as MCX, NCDEX, and others available in India).
It works similarly to Equity Trading Accounts. You deposit funds into your commodity trading Account and then start trading commodity futures. All settlements are typically processed on a T+1 day basis. That means if you make a profit today, you’ll see it in your account the next day. However, if you incur a loss, it’s deducted on the same day.
One popular platform for commodity trading in India is the Multi Commodity Exchange (MCX). With an MCX trading account, traders can access a wide range of commodity futures contracts and participate in price movements.
Online and Offline Trading Accounts
You have two options to choose from when it comes to placing stock trading orders: offline and online. With the offline method, you will need to give your broker a call and tell them your orders for buying or selling securities.
A well-known offline trading account provider is ICICI Direct, which offers a traditional approach to trading. Customers can visit ICICI Direct branches and interact with experienced brokers who provide personalized investment advice.
If you’re more of a tech-savvy investor, online trading accounts might be more your speed. With these, you can place orders right from a trading app or platform that you’ve downloaded on your laptop or mobile device.
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It’s as simple as a few taps or clicks — no phone call needed. This way, you can trade whenever and wherever you want. Upstox is a good example for a provider that offers online trading accounts.
Two-in-One and Three-in-One Trading Accounts
You might have come across terms like “two-in-one” and “three-in-one” when exploring types of trading accounts in India. Wondering what these are? Well, a two-in-one account provides you with a unified access point to your trading account and Demat account.
A three-in-one account is a one-stop solution that integrates a bank account, a Demat account, and a trading account. This trifecta of accounts is interlinked, paving the way for smooth and speedy online trading.
The best part? You can open all three accounts with just a single application form. The beauty of a three-in-one account lies in its versatility. The bank account serves as a place to stash your savings, while the trading account, essentially a share broker account, enables you to trade in equity and other market instruments.
When compared to the two-in-one account offered by some broking firms, the three-in-one account often comes out on top due to the ease of fund flow between the bank and the trading account. It’s this seamless integration that makes the three-in-one account a preferred choice for many.
Kotak Securities is a provider of two-in-one trading accounts in India. In addition to the trading and Demat accounts, the firm also provides banking services, making it convenient for investors to manage their funds.
Discount Trading Accounts
A discount broking account is your basic, no-frills trading account. Brokers who specialize in this type of account offer a call and trade facility, but don’t expect any offline trading options.
Interestingly, while these accounts can seem pricey due to the high volumes traded at low costs, they can actually be quite a bargain for investors. As long as you’ve got a discount broking account, you’re all set to execute trading transactions.
One of the key selling points of this type of account is its low brokerage fees. This is largely due to the lower operating costs compared to other types of trading accounts. But remember, they’re all about the basics; don’t expect any extra goodies like financial advice or research services. One notable example of a provider that has this facility is the Angel One Account.
Full Services Trading Account
With a full services trading account, you get access to advisory services and financial advice, which can be a real game-changer when you’re grappling with trading decisions.
In a nutshell, a full-service trading account is like your personal assistant in the trading world, saving you precious time by doing the heavy lifting when it comes to market research and decision-making.
HDFC Securities is a popular provider of full-service trading accounts in India. With an HDFC Securities trading account, investors gain access to a wide array of investment options, including equities, derivatives, mutual funds, IPOs, and bonds.
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Final Thoughts
A trading account is your gateway to the bustling world of stock markets, a tool that can potentially help you rake in substantial profits. Now that you’ve got a good grasp of the different types of trading accounts available in India, it’s time to map out how these account types align with your trading goals.
Consider your interests and requirements carefully, and decide which type of account aligns best with your trading goals.
Remember that it’s also equally important to choose a trustworthy brokerage firm to open your trading account. Why? Because a reliable broker can help you avoid any hiccups in your trading journey and ensure that your account is safe and secure.
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