Trading Account: Definition, Eligibility Criteria And Features

Consider a scenario in which you have surplus funds that you would like to invest but have been unsuccessful in identifying a viable alternative to conventional banking products that offer the potential for multi-year returns. One of your acquaintances recounted the outcomes of a stock market investment he had undertaken. That piqued your curiosity, so you proceeded to investigate further in order to obtain further insights. You discovered that trading and investing in the stock market requires both a trading and Demat account.

What is a Trading Account?

A Trading account is a platform offered by a broker to its customers dealing in the stock market to buy and sell securities electronically without the restriction of carrying or bidding for shares in the physical market. The trading account is like a hotline between your Demat account and your bank account. When an account holder wishes to buy a security from the cash market, all he or she has to do is login to their trading-account. Fill in all the information, like quantity, price, etc., fund your trading-account with the amount needed to buy the securities, and hit the buy button.

Why Do I Need a Trading Account  ?

Before the advent of trading and demat accounts, clients would instruct brokers to acquire shares at specific prices and quantities, leading to cumbersome physical trading and settlement processes. However, advancements in payment methods and technology prompted brokers and exchanges to establish online platforms, facilitating transparent transactions. Thus, the trading-account emerged, enabling clients to place orders through registered stock brokers. Despite the appearance of direct customer involvement, orders are executed by brokers on behalf of their clients, ensuring seamless interaction with the exchange.

Also read: Objectives of trading account

The process of opening a Trading account involves:

How to Open a Trading Account ?

1. Choose a broker offering diverse investment options like equity, commodities, currency, and mutual funds, with low brokerage fees and robust trading tools. Ensure the broker provides platforms such as smartphone and desktop applications, API integration, and value-added services.

2. Finalize your selection and proceed with the paperwork for opening a tradingccount, typically including identity proof, residence proof, and sometimes proof of income. Most brokers also offer demat account services alongside trading-accounts, essential for holding securities. Complete the necessary documentation to begin your trading journey efficiently.

   Also read: Features & Benefits of Demat Account

What is a KYC Form?

KYC (know your client) is carried out every time, whenever a citizen needs to make changes in its government documents or has to apply for any commercial activity like opening a account for trading . Earlier Kyc was done physically, but today with the advent of tech and companies finding safest way possible to cut cost by maximizing use of technology, officials have come up with new techniques to do kyc using internet means.

eKYC is an automated online process for client identification verification, replacing traditional physical document-based approaches. To meet KYC requirements, you must provide relevant identification information, which the brokerage house verifies. This verification process is essential before you’re acknowledged as a customer and your trading and demat account is activated. eKYC streamlines the identification process for both corporate and officials. It offers a convenient digital alternative to traditional verification methods.

Proof of Identity Documents

• Voter ID Card
• Aadhaar Card
• Passport
• Driving license
• Any other ID card issued by the state and central government

Address Proof Documents

• Aadhaar card
• Ration card
• Utility like gas and electricity bills
• Voter ID card
• Driving license
• Bank passbook

Income Proof Documents

• Copy of Income Tax Return filed with the IT department
• Form 16 and copy of salary slips
• Bank statement for the last 6 months
• Demat account holding statement
• Annual income audit by a CA

3. Post the submission of the documents, the broker will conduct a telephonic KYC verification or video kyc verification. During a E-kyc, the account opener will have to either record a small video or converse with the person verifying the details.
4. The account would be operational for you to start with investment or trading journey as and when it is approved by the broker after doing all the verifications. If the account holder opted for trade in derivative segment aka, futures and options, it will usually take 1-2 business days at ton the part of broker to verify your details.
5. Once the broker has verified your details, you will get the login id though mail through the broker. At last fund your trader account to make the first trade.
   

   Where to Open a Trading Account ?

   Now that you have learned what a trading account is, the use of a trading account, and the paperwork required for opening a trading account, we will learn where we should open a trading. The question of ‘where to open an account’ is the same in every other situation. You should check the cost, facility provided, complementary services process, customer service in resolving the error, and many more. Let’s discuss the things that should be kept in mind before opening a trading account.

   Here are some considerations for choosing a good stock broker:

1. Brokerage Charges: Fees for buying and selling securities vary; opt for brokers with low-cost plans.
2. Research Services: Evaluate the quality and accuracy of research provided, essential for informed decisions.
3. Reputation and Reviews: Prioritize brokers with positive customer feedback and a solid performance record.
4. Trading Platforms: Choose platforms tailored to your needs, whether desktop or smartphone applications.
5. Customer Service: Reliable support staff crucial for timely issue resolution and assistance.
6. Advisory Services: Assess the expertise and experience of analysts for reliable market insights.
7. Educational Tools: Look for brokers offering webinars and resources to aid newcomers in learning about investments