How to Open A Trading Account?
With rising financial awareness, more people are investing in financial assets like stocks and bonds. Investing in the capital markets also helps in diversifying your portfolio. Over the long term, equities have been known to deliver decent returns. Along with proper financial knowledge, one needs to open a Demat account and a share trading account, and have a bank account to invest in the equity markets. In this article, let’s discuss how to open a trading account, what the account means, and the required documents.
What is a trading account?
When you invest in the equity markets, you buy shares in exchange for money. The shares bought by the investors are stored in certified depositories. These depositories provide unique Demat accounts to investors that store their stock holdings securely. When an investor sells a share, it is removed from the Demat account.
Know more about Trading Account
If the shares are stored in the Demat account, and the money comes from the bank account, what role does the trading account play? The trading account is the common link between the Demat account, bank account, and the investor. The trading account facilitates the buying and selling of shares. If you want to trade in equity shares, you mandatorily have to create a trading account.
If you subscribe to a public offering, you don’t need a trading account as the shares, if allotted, automatically go to the Demat account. But you will always need a trading account to sell those shares or buy other shares.
How to open a trading account?
Step 1: There are many stock broking companies. Do your research and select the best stock broker to suit your needs. First, compare charges, supported asset classes, user interface, security, and other features of multiple brokers and then decide the one that meets your needs. For instance, Angel One is one of the most-trusted stock brokers in India, thanks to their seamless user experience, quick account opening process, robust and secure platform, and so on. You can not only trade stocks but also commodities, F&O, US stocks, etc., on the platform. Talking about charges, Angel One charges 0 for equity delivery and a minimal fee for trading. You can read more about it here.
Step 2: After choosing a stock broker, get in touch with the firm and enquire about the trading account opening procedure.
Step 3: Next, fill out the trading account opening form and furnish the required documents like proof of identity, proof of residence, and proof of income. You can use the Aadhar card or passport as proof of residence and a copy of your Aadhar card or PAN card as identity proof. Note that the PAN card is compulsory for opening a trading account.
Step 4: After submitting the documents, the brokerage will do a KYC verification by sending a representative to your house, or you will have to do online verification.
You can also opt for the e-KYC process if you don’t wish to do it online. Note that for the e-KYC process, your PAN should be linked to the Aadhar and your bank account. Also, your mobile number should be the same as the Aadhar card.
Step 5: After verification, you will be given your trading account details. After the verification process, it usually takes 3-4 days to activate the trading account.
Documents Required to Open a Trading Account
- Proof of identity: For this, you can submit a passport, voting ID, driving license or Aadhar card.
- Proof of address: For this, you can furnish documents like telephone bill, water bill, and electricity bill.
- PAN: This is compulsory for opening a trading account.
e-KYC to Open a Share Trading Account
If you do not want to submit physical documents, you can opt for the alternative method –
e-KYC process. For the e-KYC method, you will have to ensure that your Aadhar card ID is linked to your PAN card and your bank account. The mobile number linked to Aadhar card should be the same as the mobile number submitted in the trading account application. The Aadhar verification is done online through a one-time password. You will also have to upload a copy of the PAN card and a cancelled cheque. After submitting the documents, you will have to verify yourself through video conferencing or visit the nearest branch of the broker.
Read more: Steps To Link Aadhar Card With Mobile Number
With the advent of the internet, opening a trading account and investing in the markets has become easy. Brokers have simplified the process of trading, which is also a reason for increasing participation in the capital markets.
How can I start my trading account?
To start your trading account, you will first need to determine whether you are looking for a full-service broker or a discount broker. After zeroing in on the broker, you can apply to them for a trading account by completing KYC requirements.
Is opening a trading account free?
Generally, opening a trading account involves some charges, such as one-time opening fees, account processing charges, and account maintenance charges (AMC). While the first-year AMC is zero in Angel One, a nominal fee is charged from the second year and beyond.
Can I start trading with 1 rupees?
Since there is no minimum investment requirement in order to commence trading in stocks, yes, you can invest in stocks with as little as Rs. 1, subject to the availability of a stock currently trading at this market price.
Is trading account safe?
Yes, a trading account is very safe and secure. Brokers need to adhere to strict SEBI and exchange rules and regulations and have stringent data protocols in place to ensure the security of transactions placed and executed.
How much does it cost to start trading?
The cost to start trading depends on your trading strategy and the price of the stocks that you are interested in. At a minimum, your investment should be sufficient to cover the full price of the stocks along with the fees and charges due for executing these trades.