With rising financial awareness, more and more people are investing in financial assets like stocks and bonds. In order to start trading or investing in such assets, one needs a trading account, demat account and bank account.
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 by 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. The shares are stored in the demat account and the money comes from the bank account, then what role does the trading account play?
The trading account is the common link between the demat account, bank account and the investor. The buying and selling of shares are facilitated by the trading account. 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 goes to the demat account. But you will always need a trading account to sell those shares or buy other shares.
Now that you know the function and benefits of a trading account, you may be inclined towards opening a trading account. Let’s take a look at how to open a trading account.
How to Open a Trading Account Online?
These are the steps to open an online trading account:
- Compare the services and brokerage rates provided by different firms registered with SEBI.
- Select the one best suited to your needs.
- Fill out the account application form along with the necessary KYC documents.
- Once verification is completed, you will receive your unique trading account details.
For a more detailed step-by-step guide on how to open a trading account with Angel One, check out the Angel One User Manual.
How to Open Trading Account Offline?
1. Select a Trading Member
Once you have compared the services and benefits offered by different trading members, you can finalise the most suitable trading member for your needs.
2. Fill in the application form
You will need to fill out an application form for opening a new trading account. Along with this, you will need to submit a list of documents such as Identity Proof, Address Proof, PAN card, Bank details, segment details, your personal details, nomination details etc.
3. Verification process
You will be given a list of rules and regulations to ensure ethical and legal trading, and to clear any doubts you may have regarding holding a demat-cum-trading account and the different functions it serves. The trading member will conduct an in-person verification of you and your KYC documents.
4. Final approval
Once your documents are verified, and the final formalities are completed, your new trading account will be opened. You will also be given the Unique Client ID for your account.
Finding the Right Broker
To get a trading account, you will have to zero in on a broker. Brokers are of two types — discount and full-service. Basically. The categorization is of the type of accounts they provide.
Discount brokers provide no-frills trading accounts that allow just buying and selling of shares without any value-added services.
Full-service brokers provide research, recommendations, financial data and a host of other services with the trading account.
Once you have decided the type of broker, consider its credibility in the market. Stock market frauds are not very common in India but are not unheard of either. Along with the credibility, take into account the proximity to the broker’s office and interface of the trading software. The software interface is an important factor as a clumsy interface can be an irritant while trading.
After finalising the broker, you can either visit their office and ask for a physical form or fill up an online form on their website. A representative from the brokerage firm will help you with the application process and inform you about the required documents. Most brokers offer a demat-cum-trading account.
Note: The process for opening a demat and trading account is the same on Angel One.
Documents Required to Open a Trading Account
Like most other services, you need to submit a proof of address and a proof of identity to create a trading account.
PAN card is compulsory for opening a trading account.
For proof of identity, you can submit a passport, voting ID, driving license or Aadhar card.
The address can be verified by submitting documents like telephone bill, electricity bill and water bill.
A photocopy of the PAN card, address proof and identity proof has to be submitted, with the original for the manual KYC process.
Some brokers also carry out a telephonic or manual verification process. The trading account is activated by the broker within 48 to 72 hours after the application and documents are accepted. If you do not want to submit the physical copies of the documents, there is an alternative method.
E-KYC Process to Open a Share Trading Account
If you want to avoid manual KYC, you can opt for the E-KYC method through the Aadhar card. For the E-KYC method, you will have to ensure that your Aadhar card is linked to tyour PAN card and your bank account. The mobile number linked to the 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. You will be then asked to e-Sign the documents and your trading account opening journey will be completed from your end.
With the advent of the internet, opening a trading account as well as investing in markets has become easy. Brokers have simplified the process of trading, which is also a reason for increasing participation in the capital markets. If you are interested in trading, you can open a trading account with Angel One, one of the trusted stock-brokers in India.
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?
Opening a trading account with Angel One is completely free. In fact, you do not even have to pay account maintenance charges in your first year. You have to pay only nominal account maintenance charges from the second year onwards.
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.