What are the Benefits of a Trading Account?

The Indian financial market has various asset segments like equity, derivatives, currency and commodities and more. To buy and sell securities in the secondary market, a trading account is a must-have today. This trading account needs to be linked to your demat account to facilitate dematerialized or electronic holdings, and to your bank account to facilitate easy transfer of funds. 

That said, many new investors may not be aware of what a trading account is and why it is important. If you too have been unsure about what a trading account is and why it is necessary, let’s take a closer look at the meaning of this account and the benefits it offers.

What is a Trading Account?

A trading account is a mandatory requirement if you want to buy and sell equity shares, exchange-traded funds (ETFs), commodities, derivatives and other assets in the capital markets. As its name suggests, this type of account facilitates trading via the stock exchanges in the secondary market. 

Before the advent of electronic trading systems, shares and securities were traded using the public outcry system. The trading account was not a necessary requirement during those years. However, the introduction of electronic trading systems in the early to mid-1990s made it essential to have a trading account to facilitate the easy and seamless purchase and sale of electronic or dematerialised securities. 

How Does a Trading Account Work?

A trading account is opened with a SEBI-registered stock broker like Bajaj Financial Securities. These stock brokers offer various trading platforms like web terminals, mobile applications and more to allow you to place orders in the markets. Once you open your trading account, it must be linked to your demat account (which is used to hold your shares and securities in a dematerialised format) and your bank account (which holds your funds). 

When you place a buy order online through your trading account, it is matched with a corresponding sell order. Once the order matching is complete, your order is sent to the stock exchange for processing and then executed. The required funds are debited from your trading account and the shares purchased are credited to your demat account. 

Similarly, when you place a sell order through your trading account, a similar process of order matching occurs. Once your sell order is matched with a corresponding buy order, it is sent to the stock exchange for processing, and the shares are debited from your demat account. The sale proceeds are then credited to your trading account, from where you can withdraw it to your linked bank account. 

The Top Benefits of a Trading Account

Opening a trading account may be mandatory for trading in the markets, but there are numerous other benefits that it offers over and above its ‘must-have’ tag. Let’s take a closer look at these benefits. 

1. Seamless Transaction Support

With the rapid advancements in technology, trading accounts today offer seamless transaction support to account holders. You can place buy and sell orders with just a few clicks, and the trading account ensures that your transactions are executed in real-time as and when they are matched with corresponding orders. What’s more, the funds and assets are debited and credited as needed in a smooth and hassle-free manner. 

2. Customisability

You can also customise or personalise your trading account in many ways, thus elevating the entire experience of trading in the markets. You can create your own watchlists of stocks to track and monitor, personalise the market insights you receive as per your requirements, and tailor your notification settings to ensure that you do not miss out on any important updates related to your investments or portfolio. 

3. One Account for Different Market Segments

A trading account also allows you to buy and sell assets in different market segments from one common platform. With your single trading account, you can access market segments like equity, upcoming IPOs, commodities, derivatives and more, and trade via exchanges such as the Bombay Stock Exchange (BSE), the National Stock Exchange (NSE), the Multi Commodity Exchange (MCX) and the National Commodity and Derivatives Exchange (NCDEX).

4. Access to Education and Research

When you open a trading account with your preferred stock broker, you can also access various educational tools and research reports provided by the facilitator. These educational tools can help you understand the fundamentals of the financial markets and give you insights into the inner workings of different market segments. Research reports allow you to understand the markets better, so you can make informed trading decisions. 

5. Multi-Platform Support

With a trading account, you not only get the ability to place orders in the market, but you also enjoy the advantage of anytime-anywhere trading. This is because most leading stock brokers today offer multi-platform support that includes mobile applications, web applications and desktop terminals. So, whether you are on the move or in the comfort of your home, you can place orders seamlessly in the market segments of your choice.

Conclusion

This sums up the fundamentals of what a trading account is and why it is a must-have if you want to trade or invest in stocks and other securities today. With advancements in technology, modern trading accounts facilitate seamless digital trading via the stock exchanges. Additionally, most leading stock brokers today are also registered Depository Participants (DPs), so they offer 2-in-1 accounts that combine a demat account as well as a trading account in one product. 

In case you do not have a demat and trading account yet, you can choose Bajaj Financial Securities as your stock broking partner and start trading in your preferred market segments via the user-friendly Bajaj Securities mobile trading app.