To start investing it is essential to have a trading account. A Trading account facilitates placing our orders for buying and selling securities with the stock exchanges. Without a trading account, we cannot participate in stock market trading. It is important to note that investors can choose from a variety of trading accounts. As investors or traders follow different strategies to invest in the share market, their requirements will naturally differ. So, the Depository Participants (DPs) provide different types of trading accounts to suit the needs of different individuals. Broadly speaking, one can go for two kinds of trading account opening. Based on the services they provide a general categorization of trading accounts includes the following two types.
- Discount broking account: The discount brokers offer these kinds of trading accounts only. Discount brokers mostly provide basic trading facilities. All the services are usually available online only. One can comfortably trade in various share market securities. However, he cannot get access to additional perks such as advisory or research services. The main idea of a discount brokerage trading account is to avail a low-cost trading facility. As there are limited services on offer, the brokerage charges tend to be pretty low.
- Full-service trading account: Full-service brokers provide these accounts. The distinct feature of such trading accounts is that they offer a whole range of services. Investors get several additional services, apart from trading facilities, like research materials, expert investing recommendations, and tips, So, trading accounts with a full-service broker brings in a holistic ecosystem to invest in share markets. Firms like Share India are prime examples of such brokers, which offer o excellent services for trading conveniently at minimal costs.
Different types of Trading Accounts
Now, that you have understood the basic categorization of trading accounts, we hope it shall help you choose a broker. However, contacting the right kind of broker is not enough for an appropriate trading account to be opened. One must know properly about the various types of trading accounts brokers provide. Let’s discuss each one in detail.
A Cash trading account opening mandates a customer to pay the entire amount of securities bought. The full payment of the securities purchased is payable only by the investors. There is no borrowing facility provided by stockbrokers on cash accounts. It is the trader’s liability to pay the money for the transactions instantly to purchase assets.
Margin trading Accounts
With a margin trading account, investors or traders get the facility to borrow funds from their respective stockbrokers. Contrary to cash accounts, investors do not need to have the entire sum of money to carry out a transaction. As a result, opening a margin trading account provides an added benefit. Even if an individual lacks sufficient money to buy a good asset, he can still buy it with funds lent by the broker. A small amount of risk is present here, in case your assets lose their value. Then you have to hand over the securities to the broker or settle the debt with a cash payment.
Equity and Derivatives Trading Accounts
Investors can also open a trading account that facilitates equity and derivatives trading. These specialized trading accounts provide a good platform to trade in research-intensive market segments like equities or derivatives. Equities are stocks of companies where investors trade shares. Derivatives are contracts valued against underlying assets. We can open these types of trading accounts only with brokers who are members of a stock exchange.
Commodity Trading Accounts
The commodity market deals in economic products. Trading takes place mainly in such physical goods. Agricultural items, such as gold, oil, etc. are the primary assets. Manufactured goods are rarely involved in commodity trading. A commodity trading account allows investors to buy or sell these physical goods which have a market-determined value.
Share Trading Accounts
A share trading account allows you to trade only for shares. One can purchase or sell shares through such trading accounts. No other kind of trading involving any other asset class is permissible with a share trading account. However, the good part is that individuals can trade different types of shares. Also, there is not much restriction on the number of shares traded, which is helpful, especially for day traders.
Options trading account
An options trading account lets investors participate in the options market. An options contract gives the option holder the right to buy or sell a security at a specific price and time. An options trading account is available for individuals if the broker believes you are an investor with a considerably high net worth.
So, there are different types of trading accounts. One can pick the right one according to his or her needs. Reputed firms like Share India provide all these types of accounts. The charges vary for every type of account. Most of them are reasonably priced at Share India. Investors can select one that fits their trading objectives and finances.