BAJAJ BROKING
That said, if you’re a new investor, you may not be fully aware of the importance of a trading account. Read on to learn about the purpose of a trading account and why you need one to take part in the Indian stock market.
The primary purpose of a trading account is to enable investors to place buy and sell orders for securities on the exchanges. A trading account is almost always linked with a demat account. This is done to make the purchase and sale of shares and other securities as seamless as possible.
Here’s a quick overview of how a trading account works. If, for example, you wish to purchase 100 shares of a particular company listed on an exchange, you first need to deposit the requisite funds into your trading account. You can do so by transferring funds to your trading account from your bank account.
Once your trading account is well-funded, you can then place a buy order for 100 shares of the company. The order is sent to the exchange for matching with a corresponding sell order. Once your buy order is executed, the 100 shares that you bought will be automatically transferred to the linked demat account for safekeeping.
When the time comes to sell the shares you hold in your demat account, all you need to do is place a sell order for the number of shares you intend to sell. Once the order is executed by the exchange, the shares that you sold are automatically transferred out of your demat account.
As you can see, the importance of a trading account cannot be stated enough. Without a demat and trading account, electronic trading at the speed and scale as we know it today would not be possible.
Still wondering why you need a trading account? Here’s a closer look at some of the key reasons.
You may not always need a trading account to purchase securities. A demat account is all you need to invest in the primary market – Initial Public Offerings (IPOs) and New Fund Offers (NFOs). To sell the securities in your demat account through stock exchanges, however, you mandatorily require a trading account. Without the account, you won’t be able to sell your investments to realise gains at all.
One of the many benefits of online trading accounts is the ability to execute trades rapidly and in quick succession. In fact, all it takes is just a few seconds to place a buy or a sell order. And since there’s no limit to the number of trades that you can place within a day, you can purchase and sell securities as you see fit.
Another major advantage of a trading account is that it gives you detailed information regarding the various bids and asks for a particular asset. Having the prices of assets available in a transparent manner lets you plan your trades better and manage your risk more effectively.
This is one of the primary reasons why you need a trading account. Equity is far from the only segment that you can trade in the Indian stock market. There are other trading segments such as bonds, mutual funds, Exchange Traded Funds (ETFs), commodities, currencies and derivatives as well. With a trading account, you don’t have to limit yourself to just stocks. Instead, you can also simultaneously trade in these other segments as well.
Similar to how there are multiple trading segments in the Indian stock market, there are various order types as well. This includes intra-day orders, delivery orders, limit orders, market orders, Good Till Triggered (GTT) orders, pre-market orders and after-market orders. With a trading account, you get the freedom and flexibility to place just the kind of order your trading plan dictates.
The ability to quickly get the status of your investment portfolio and open positions is another reason why you need a trading account. Every account, irrespective of the stockbroker, gives you a detailed account of all your holdings.
This includes the price at which the security was originally purchased, the current market price, the number of units you’re holding and the unrealised profit or loss. Since all of the relevant information regarding your portfolio is presented to you in a neat and orderly fashion, you get to save time and effort.
Most trading accounts these days offer insightful data on market movements and individual stocks. From research reports and trading calls to market overviews and corporate actions, a trading account provides a lot of useful and actionable information. As an investor, you can use this to your advantage and plan your trades accordingly.
One of the benefits of a trading account is that all your trades are recorded meticulously and in a detailed manner. At any point in time, you can quickly retrieve your trading statements for any particular period. Furthermore, you can also download other reports such as your profit and loss statements, capital gains statements, contract notes and margin reports, among others.
Trading accounts, when they were first introduced, were just a platform for purchasing and selling securities on the exchange. However, of late, it has evolved into more of an advisory portal offering insightful information about your trades and the market as a whole. Nevertheless, the increase in the scope has only served to enhance the importance of the trading account.
Share this article:
Standard Deviation: Meaning, How To Use and Calculate
14 Dec, 2024 | 5 Min. read
Business Forecasting: Definition, Methods, and Models
14 Dec, 2024 | 8 Min. read
Modern Portfolio Theory (MPT): Definition, Types & How To Use
14 Dec, 2024 | 8 Min. read
ASM & GSM Meaning - List of ASM & GSM Stocks
14 Dec, 2024 | 7 Min. read
What Is Nifty BeES? A Guide to Its Benefits and Working
14 Dec, 2024 | 6 Min. read
Nifty Healthcare Index
14 Dec, 2024 | 1 Min. read
Hedging: Meaning, Types, Risks and Strategie
14 Dec, 2024 | 6 Min. read
Bollinger Bands: Meaning, How To Interpret and Use
14 Dec, 2024 | 7 Min. read
Moving Averages Indicator: Variations & Examples
13 Dec, 2024 | 4 Min. read
Learn Everything About Breakout Trading
13 Dec, 2024 | 9 Min. read
Gold Price in India | Gold Drops 1% After Reaching Five-Week High
13 Dec, 2024 | 39 Min. read
Statement of Account and Demat Account: Meaning & Differences
13 Dec, 2024 | 4 Min. read
RBI Launches ULI: Transforming Loan Access
August 27, 2024 | 4 Min. read
Textile Sector in India
September 20, 2024 | 5 Min. read
List of IPOs with DRHPs Filed
November 30, 2023 | 3 Min. read
Aditya Birla Group
September 28, 2023 | 10 Min. read
Bajaj Housing Finance Ltd IPO: Things Smart Investors Need to Know
September 05, 2024 | 4 Min. read
Budget Stock Ideas 2024-2025 | Stocks to Buy Today
July 24, 2024 | 4 Min. read
IPO Eligibility Criteria : Full Details
March 15, 2024 | 6 Min. read
What Is the Lock-In Period in IPOs?
October 18, 2023 | 6 Min. read
Godfrey Phillips Announces 2:1 Bonus Shares
September 16, 2024 | 7 Min. read
Jindal Group- A Comprehensive Analysis
September 27, 2024 | 7 Min. read
Level up your stock market experience: Download the Bajaj Broking App for effortless investing and trading