Whether you are planning to trade online or through the traditional mediums, setting up a trading account is one of the most basic things you have to do.
In its basics, a trading account is an account that can hold cash, securities, and any other holdings used for investment. It’s primarily an investment account but primarily refers to the primary account of a day trader. Trading account is usually opened with a financial brokerage firm or an investment bank, with different regulations to follow. Offering day traders to buy and sell stocks, currencies, or any other securities frequently over a day, the charges of such accounts also vary from the traditional accounts.
Having a trading account is fundamental to start investing or trading assets; whether its stocks, CFDs, bonds, ETFs, currencies, or any other tradeable commodities. While it operates pretty similarly to your normal bank accounts, it has its fair share of differences. Below, we discuss the different elements in detail.
Not Your Ordinary Bank Account
If you are interested in trading, it is safe to assume that you already have the experience of using bank accounts where you hold or save your money. These accounts are usually offered by banks, co-operative societies, or other similar financial institutes. However, if you want to use the money in your account to invest or trade securities; you would have to open a trading account. It is mainly a connecting link between an investor’s savings account and Demat account.
Usually managed by brokerage firms, a trading account is where you deposit your money with a view to buy, hold, or sell different securities, currencies, and holdings. While some banks offer trading capabilities right through your normal account, they also do that by opening a trading account with a unique ID on your behalf. These accounts can increase or decrease in value based on your invested holdings, and thus, are regulated differently by financial authorities.
Different Requirements to Setup
Just like a savings account, opening a trading account would require you to provide some basic personal identification information. It includes your name, proof of address, proof of identity, proof of income with income tax returns, etc. Some brokers may also require trading goals and budgets.
Anyway, there are numerous trading platforms available online where you can sign up just by providing some personal details and a valid bank account. However, make sure to learn about the authenticity of your preferred online broker before applying for an account.
Advantages of Trading Platform
By having a trading account, you can remove the need to be physically present in the stock exchange in order to trade on securities. Instead, you can just use the available tools to place or cancel an order right from the app. A trading account also helps to keep all your holdings in one place, enabling you to check on them all at one go. Features like notifications and seamless transactions are a big bonus too.