Types of Trading Accounts in India

Getting started in buying and selling securities on the Indian financial markets requires a trading and Demat account. Demat accounts allow you to have your shares and securities stored in a dematerialised format, while trading accounts enable you to buy and sell them on the exchange.

You need to know about various trading account types in this context. While they're essentially the same in that they help buy and sell securities, one of the significant differences is the kind of securities you can handle on these accounts. So, let's take a look at your various types of trading accounts.

Types of Trading Account

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

1. 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.

2. 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.

3. 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. To make an informed decision regarding the type of trading account that best suits your needs, it's a good idea to calculate brokerage costs associated with both offline and online trading options.

4. 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.

Open Demat Account

Your first step to enter share market

Get Started

* By signing up you agree to our Terms and Conditions

Types of Trading Account Based on Services

1. 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.

2. 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 investment research.

Conclusion 
In India, trading accounts are the starting point for investing in stocks, commodities, or any financial security. Investors can choose from equity, commodity, offline, online, discount, and full-service trading accounts based on their needs for trade, risk appetite, and costs. According to the regulations, only SEBI-registered brokers are required to open trading accounts. Before they open a trading account, investors need to assess brokers based on their costs and services and redress for complaints.