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What is a trading account: The beginner's guide

20 May, 2021

What is a trading account

If you are an absolute beginner who is willing to learn concepts of the stock market from the basics, look no further. You have arrived at the right page. This blog talks about what a trading account is, the basic difference between trading and Demat accounts, and how a trading account works. However if you are already familiar with the concept and want to know the benefits of a trading account.

Physical investing vs. Online investing

Gone are those days when physical share certificates existed. Traders then had to be physically present at the stock exchanges and communicate themselves verbally to the other parties to trade. But, ever since the open outcry system got replaced with online trading, traders can buy and sell shares and other securities electronically using a trading account. With online investing, you as an investor do not have to be physically present at the stock market, which has not only simplified the process but also made the settlements and delivery quicker.

What is a trading account (and how is it different from a Demat account)

To make it easy for you to understand, a trading account is an account from which you can buy and sell shares and securities; while a Demat account is an account in which you can hold the bought shares and securities. You cannot make transactions using a Demat account. For buying and selling, you must have a trading account.

How does the trading account work?

To open a trading account, Bank and Demat accounts are mandatory for settlement of funds and securities. As per the exchange rules, margin is required to execute buy or sell transactions in the form of cash or pledge. Once you place an order into the system, it gets processed in the stock exchange. After the successful execution on T day, it gets settled on T+2 day. On the settlement day (T+2), you have to settle obligations of funds and securities as per transactions executed on T day. When you execute buy transactions of any securities, money needs to be paid to the broker. On successful payment, securities get credited to your Demat account. Similarly, when you want to sell your shares, you have to place an order. Upon execution of the sell transaction on T day, the shares get debited from your account and money gets credited to your account on the settlement day (T+2). As simple as that!

Basics of trading account

A lot of new investors feel that investing in the stock market is a time-taking task. It sure requires your time in the beginning, but as and when you get used to it, it takes only minutes to invest. Also, when we say it does take up some time in the beginning, it is less than 10 hours a month; and that too if you choose to do all the stock research by yourself. Otherwise, if you follow the recommendations, it might take even lesser than 2 hours a month.

You can open a trading account only through a registered stockbroker like SHAREPA that acts as a mediator between you and the stock exchange. This trading account is linked to the bank account from which the liquid cash can be used to buy or sell shares or other securities in the stock market.

To know how to select the Best Discount Broker in India and to get some of the best tips to trade online

For any queries, drop us an email at helpdesk@sharepa.net.in or call us on 022-61778660 / 68. To open an account, please click on the button below.

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