Trading Accounts: Know Everything Before Stepping Into The Stock Market.
For anyone who needs to invest in stocks or buy and sell shares in the stock market, trading accounts are really crucial. After all, they have become an essential tool that helps to participate in share market transactions seamlessly. In every buy and sell process, these accounts make the entire process of share trading secure and speedy.
So, if you are someone planning to step into the stock market and invest in shares, you will need a trading account first. However, before that, you must make sure that you have sufficient knowledge about these trading accounts, how they work, and the benefits of using them. To know about these things, you can continue reading and get to know them. So, move on to the next section of this blog.
What is a Trading Account?
A trading account refers to an investment account that holds securities, cash, and other holdings like brokerage accounts. This account is used to buy or sell equity shares in the share market. With this account, an investor can buy and sell assets as many times as they want, that too within the same trading session. In short, it is a special account that allows online traders to make transactions. Without trading accounts, online traders cannot trade in the stock market.
Even though we say that traders or investors cannot trade shares in the stock market without trading accounts, they also need demat accounts. The demat account is used as a bank where the shares that are bought are stored. Also, the shares are sold from there. There are several investors or new investors who are not clear about the difference between trading and demat accounts. Let’s talk about the difference between them in the next section of this blog.
Trading Account v/s Demat Account: What’s the Difference?
The main difference between a trading and Demat account is that a trading account offers the interface to buy and sell shares in the stock market, while a demat account holds the shares and security like bonds, mutual funds, and ETFs, in the digital mode. Even though they are quite different and play different roles, trading and demat accounts work together to make online trading possible in the stock market.
Hopefully, you have now understood the difference between trading and demat accounts. Now, let’s move on to the next section and see how the trading accounts work.
How Does a Trading Account Work?
Trading accounts act as a link between the demat account and the bank account of an online investor. When an investor wants to buy shares, he or she places an order via his or her trading account. As per the request, the transaction takes place in the stock exchange. Once the process is finished, the investor will find that the requested number of shares have been credited into the demat account and a certain price has been deducted from the bank account.
Similarly, the transaction takes place when any trader sells his or her shares. The trader places a sale order with the help of his or her trading account. After that, it goes for processing in the relevant stock exchange and as per the order, the required number of shares get debited from the demat account and the price of them gets credited to the bank account.
Why You Should Have a Trading Account?
· Seamless Transaction:
As mentioned earlier, trading accounts are essential for a smooth and safe transaction. Online trading has helped a lot to make the procedure of fund transfer and conducting equity trading a seamless process. With the help of advanced technology, online traders can save, invest, or buy their shares in the most convenient way.
· Reliable Information:
Investing in equity is all about making the right call at the right time. When traders participate in the stock market via online trading platforms, they can get their valuable services like research reports that are prepared by experienced and knowledgeable professionals. With that information, you will be able to spot investment plans with the highest probability of earning high returns.
· One-Point Access
In India, you may find several exchanges that trade in different securities and commodities. Some of the well-known exchanges are Bombay Stock Exchange (BSE), National Stock Exchange (NSE), Multi Commodity Exchange (MCX, and )National Commodity and Derivatives Exchange (NCDEX). If you have an online trading account, you can access all these exchanges from just one common platform.
The Final Takeaway
By now, you must have gained some knowledge about trading accounts, why they are important in the stock exchange market, and how they work. So, if you want to try out your hands in the stock market and start investing in shares, you must make sure that you have a trading account. Don’t forget about this even if you think about investing in exchanges via online platforms.
