Different types of trading accounts in India

Different types of trading accounts in India

Trading Accounts

Nowadays, many investors rely heavily on the stock market for their income. If you want to try your hands in the stock market, you should understand Demat Account and Trading Account. Demat accounts provide quick and secure ways to hold shares and securities. The trading account consists of all financial assets, such as stocks and derivatives, and differs significantly from other types of accounts.

A trading account helps you to buy and sell shares within a day. When shares are bought, a Demat account is credited, and when they are sold, it is debited. The funds for trade are held in a trading account as a reserve. However, there are different types of trading accounts in India. Such as Commodity Trading Accounts, Equity Trading Accounts, Online&Offline trading accounts etc. 

Moreover, there are service based types of trading accounts such as discount broking accounts and full-service demat accounts. In this article, we will understand the types of trading accounts in detail.

Types of Trading Account

There are several types of trading accounts available in India, such as:

Equity Trading Account

With an equity trading account, you can trade stocks, futures, and options. You can even deal in currency derivatives with your existing accounts. However, equity trading accounts can't be used to subscribe to an Initial Public Offering (IPO), trade in commodities, or take delivery of stocks. 

So, if you're looking to subscribe for an IPO or take delivery, you'll need a Demat account. Additionally, if you wish to invest in futures or trade options, a trading account is sufficient, since no delivery is required.

Commodity Trading Account

An important role is played by commodity trading accounts in the market. If you wish to begin trading commodities, you must open a commodity trading account. Also, trading in commodities in India is similar to trading in stocks. However, commodity accounts are opened with registered commodity brokers and recognized commodity exchanges.

Moreover, in India, there are two major commodity exchanges:
The Multi Commodity Exchange (MCX)
The National Commodity and Derivatives Exchange (NCDEX).


Also, there used to be a different regulator for commodities and equities, but SEBI took over commodities trading a few years back.

Offline and Online Trading Account

You do not need to physically attend the exchange or broker's office to open an offline trading account. With an offline trading account, you do not have access to online trading via desktop or mobile applications. If you have an offline trading account, you must contact a broker and place an order. 

With an online trading account, you can trade using an application that transfers data to the brokerage through the Internet.

2-in-1 Trading Accounts and 3-in-1 Trading Accounts

There are three types of accounts required to trade in the stock markets: trading accounts, bank accounts, and demat accounts. You will need to transfer money from your bank account to the trading account. With the money, you can buy shares through the trading account in the Demat account.

However, some brokerages provide you with 2-in-1 accounts, which combine a trading account with a demat account, so that you can buy and sell shares and transfer them to demat accounts seamlessly.

With the 3-in-1 account, you receive a bank, demat and trading account all in one. It is easy to transfer money and shares using a 3-in-1 account. Most banks with brokerage operations offer 3-in-1 accounts.
Click here to learn how to do online trading with demat?

Different Types of Trading Accounts Based on Services

Discount Broker Account

The discount broking account is the most basic type of trading account without any add-on services. There is no offline trading available with this type of trading account except for call-and-trade. 

Trading with this type of account is very cost-effective because it trades huge volumes. With this type of account, you can only execute trading transactions. Moreover, they do not offer research reports or advisory services. Since their operations costs are relatively low, they have low brokerage costs.

Full-Service Broker Account

The full-service broker account offers you a wide variety of financial services and research. There are also a variety of additional services available, including portfolio analysis, portfolio construction, estate planning, tax advice, and access to IPO shares.

A well-known problem with full-service brokers is that their portfolio fees are too high. It is true that discount brokers are generally less expensive, but they are typically aimed at self-directed traders and investors looking for simple execution services. However, a full-service broker is a good choice if you do not want to do your own investment research.

Conclusion

To invest in the Indian stock market, you need to know the different types of trading accounts. There are different types of trading accounts available in India: equity trading accounts, commodity trading accounts, online and offline trading accounts, 2-in-1 and 3-in-1 trading accounts, discount broker accounts, and full-service broker accounts. Various accounts cater to different types of investors, with different features and services. You need to research and pick the right type of trading account based on your investment goals and trading style.

 

Types of Trading Account FAQs

Yes. You can have 2 trading accounts, but they should not be from the same broker.

The Demat account stores securities electronically, while the trading account allows buying and selling of stocks.

Traders use trading accounts to hold stocks, bonds, foreign exchange, and other investment instruments. A trading account lets you buy and sell securities or day trade.

No, you can't open a trading account without a Demat account.

An adult or a minor can open a trading account.