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Features and benefits of a trading account

If you’re familiar with stock trading, you may already be aware of what is a trading account and now would want to know the Benefits of Trading Account.

A trading account is essentially used to place buy and sell orders or trade on securities. A trading account is the only option for seamless trading in the securities markets. Think of a trading account as a cashier, and a demat account as the cash register. The cashier helps conduct the transactions, while the demat account stores the assets. A demat account, on the other hand, is used to hold onto your stocks.

Key Points

  1. A trading account is a de facto method to gain access to the stock market. Without one, you’d probably be paying hefty membership fees for a place at the exchanges.
  2. The online trading account opening process has gotten far simpler than before, making it even more lucrative to jump in and become a part of India’s success story.
  3. The primary purpose of a trading account is to buy and sell stocks, bonds, and other securities and ultimately turning them into profits while you’re at it.

The purpose of trading account

The trading account could be used for day-trading, long-term trading, or managing investments for retirement, insurances and tax savings. The primary purpose of a trading account is to trade stocks, bonds, and other securities and ultimately turning them into profits while you’re at it. What you do with it, is entirely up to you.

  • Short term trading or day-trading can last from a few minutes to as long as several weeks. It is a higher risk type of trading, but as lucrative as well, since it can give you handsome gains over a short time.
  • Long-term trading can last for as long as several years, as the investor invests in stock after considerable research and is quite confident in its prospects. The profit earned can take much longer to be realized, but the method is quite safer.

Benefits of trading account

The benefits of a trading account are what makes it a very lucrative choice over physical trading. The benefits which you can enjoy while you own a trading account are:

  • Since nearly all of our trades are happening over the internet now, an online trading account essentially helps us solicit prospective investors who want to trade securities with us. You don’t have to physically look for someone to trade with since your trading account is now doing that for you.
  • A trading account, therefore, lowers your investment costs (considerably lower, in case of discount brokers such as Upstox). It also provides liquidity (converts assets to cash).
  • A trading account is a de facto method to gain access to the stock market. Without one, you’d probably be paying hefty membership fees for a place at the exchanges.

Features of trading account

A trading account can offer varying features depending on where you open the account. Brokers are generally categorized as either traditional (full-service broker) or budget (discount broker) brokers. Traditional brokers provide all kinds of add-on services, which can include:

  • Wealth building
  • Retirement planning
  • Tax returns
  • Insurances
  • Investment Advice

They charge a hefty amount for these services, which includes commissions, annual fees and a percentage of the assets managed by them.

On the other hand, budget brokers or discount trading accounts are unlikely to dump a whole lot of confusing add-on services on the customer. They, however, do deliver more value on a smaller budget. Discount brokers are ideal for value-conscious investors who trust their own judgment and research. Discount brokers charge a minimal commission for their services and are rapidly gaining in popularity all over the globe.

Both kinds of brokers, however, are likely to offer you features such as margin trading, which allows traders to leverage their cash and trade in much larger volumes than their cash would allow.

Objectives of trading account

Traders looking to open a trading account have fairly simple and concise needs - to facilitate the multiple tasks essential for all types of securities trading.

  • The trader (you) or the broker can keep a track of all the orders placed using the trading account - including executed orders, partially executed orders, and failed orders. This is usually referred to as the Order Book by all brokers.
  • A trading account thus helps you monitor your progress by comparing your present figures with the figures of the previous trading year, all of it available in the Trade Book history.
  • You can also check all the stocks at the start (open) and end (close) of a particular trading day.
  • The stock turnover ratio can be determined from the trading account. This rate can be used to measure the failure or success of businesses.

Wrapping Up

  • A trading account is a necessity for any investor wanting to plunge into the fascinating world of value investing and day-trading.
  • The online trading account opening process has gotten far simpler than before, making it even more lucrative to jump in and become a part of India’s success story as its markets scale new heights.
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