People are often confused between a trading account and a demat account.
A demat account is the one that holds the shares in an electronic format. A trading account, on the other hand, is necessary for buying and selling of shares in the stock market.
A trading account basically is an investment account that holds securities, cash and other holdings. It acts as a link between the bank account and the demat account of the trading account holder.
A trading account is held by a financial institution and is managed by an investment dealer for the account holder to run a trading strategy.
How does a Trading Account works?
As mentioned earlier, a trading account is a link between an investors’ bank account and demat account. If the investor wants to buy shares, he has to place an order through his trading account for the same.
When the transaction done by the investor is processed by the exchange and is finally executed, the required number of shares are credited to the investors’ demat account.
The sum required for completing the transaction is deducted from the bank account of the investor.
Similarly, when an investor wants to sell the shares held by him, he places a sell order.
The transaction goes to the relevant stock exchange for processing and the required number of shares are debited from his demat account.
On the execution of the order, the invetsors’ bank account is credited with the proportionate sum.
What are the benefits of a Trading Account?
- A trading account enables access to all the leading stock exchanges for trading in different securities and commodities.
- It offers the account holder the benefit of seamless transactions.
- It is easier for the investors to earn higher returns by taking right decision at the right time through various research reports and investment information.
- With the advanced trading technology, online trading has become flexible and made it easy to keep a track record of the investments done anytime, anywhere.
- Online trading platforms provide customized support to the clients by not only handling technical issues, but also by sending alerts via SMS and email.
Documents required for opening a Trading Account
Following are the documents required for opening an online trading account:
- A Proof of Identity which includes an Aadhaar Card, PAN Card, Voter Id, Passport, or Driving License.
- A Proof of Address which includes passport, Voter Id Card, Ration Card, Driving License, Utility bills like telephone bill or electricity bill etc.
- A Proof of Income which includes a copy of Income Tax Return (ITR) Acknowledgement slip, salary slip, latest bank statement etc.
- Personalized cheque.
- Signature on white background and passport photograph.