A trading account is used to buy or sell equity shares in a stock market. Previously, the stock exchange functioned on the open outcry system. In this, the traders used hand signals and verbal communication to convey their buying/selling decisions. Soon after the stock markets adopted the electronic system, trading accounts replaced the open outcry system.
In the online method, the buyers and sellers don’t have to be physically present at the stock exchange to place orders. Instead they open a trading account with a registered stock market broker; who conducts trading on their behalf. Each trading account has a unique trading ID which is utilized to perform online transactions.
Types of Trading Account
There are many types of online accounts available for the purpose of trading securities, stock, gold, ETF’s, currencies, etc. These include Online Forex Trading account, Online Commodities Trading account, Online Currency Trading account, Online Equity Trading account and Online Derivatives Trading account. A Forex account is one which holds deposits in one or more currencies for the purpose of speculation of movement in the foreign exchange market. The commodities market is similar to that of a stock market, except that goods are traded instead of stocks. An online equity account allows you to invest in IPOs, equity, mutual funds and currency derivative instruments. Derivative accounts help make profits by betting on the future value of an underlying asset like currencies, stocks, exchange rates, etc.
What are the advantages of a Trading Account?
Let’s see now some of the advantages of having a trading account.
- One-point Access. You may find multiple exchanges in India which trade in different securities and commodities. Some of the leading exchanges are National Stock Exchange (NSE), Bombay Stock Exchange (BSE), National Commodity and Derivatives Exchange (NCDEX), and Multi Commodity Exchange (MCX). Having an online trading account enables access to all these exchanges via common platform. Wealth creation becomes one-click away.
- Reliable information. Equity investing is all about taking the right decision at the right time. Online trading platforms extend valuable services like research reports prepared by experienced and knowledgeable professionals. The reports enable investors to make informed investment decisions. Ultimately, there is a higher probability of earning higher returns.
- Notifications and customization. Trained executives hired by online trading platforms provide customized support to the clients round-the-clock. It can be a technical issue or some other difficulty to handle the trading platform. Additionally, alerts can be set through SMS or emails in order to get notification about the buy and sell targets.
- Flexibility. After trading platforms have become app-based, it has become easy to access them with the help of laptop, smartphone and other hand-held devices. Online trading has introduced the flexibility to keep a track of investments from anywhere and at any point in time.
- Seamless Transactions. Online trading has made the procedure of fund transfer and conducting equity trading very seamless. With the help of advanced technology, clients are in a favorable position to save and invest conveniently and easily.