Why do I Need a Trading Account?

Look at a trading account in the stock markets as the lever that runs the stock market wheels. It is the interface between the trader/investor and the stock markets. The Trading Account is used by investors to buy or sell equity shares in a stock market. However, the trading account is a master account that can process and execute trades in equities, index ETFs, gold ETFs, currency futures, currency options, equity F&O, etc.

Today, online trading has become your virtual interface with the stock market. But, what is special about this trading account? What is the need for a trading account and what explains the importance of a trading account?

Why do I Need a Trading Account?

You need a trading account if you want to participate in the equity markets. Any purchase or sale of shares can only be done through the trading account. For example, you cannot directly sell from your Demat account. It has to be routed through the trading account only. Each trading account has a unique client code or UCC, which is used to identify your transactions in the stock market and accordingly, either map these trades.

Here is why there is a need for a trading account.

• The importance of a trading account stems from the fact that it allows investors to set their trading limits. In short, the trading account becomes like a DIY platform.

• Trading account facilitates speedy execution of trades in a simple, seamless and transparent manner.

• You can buy for intraday, sell for intraday, buy for delivery, sell for delivery, and also trade on margin or trade-in F&O using the trading account.

• Equities are the best wealth creators in the long run. The importance of a trading account comes from the fact that it is your window to equity markets and helps you to gradually create wealth in the long run.

• The trading account is embedded with support data and insights like research reports, trading calls, hedging ideas, etc. As a trader, the trading account is not just a platform but also a mini advisor and guide.

• There are several MIS reports including profit statements, capital gains statements, classification of short term and long term gains, ROI statements, etc that can be downloaded from the trading account itself.

Uses of trading account

The stock trading account has several uses. Here are a few of them.

• It enables one to take a long-term view of stocks or a portfolio of stocks. This is normally instrumental in wealth creation in the long run.

• Short-term view in the market either on the long side or short side can be executed in the trading account either using equities or by using futures and options.

• The trading account also enables you to hedge currency risk or take positions on currencies like the dollar, pound, euro, and yen through trades in currency futures and options.

• It enables you to regularly assess your performance in the stock markets in terms of profits, capital loss, return on capital, the yield on transactions, analysis of profits versus costs, and a lot more.

• Trading account normally forms the basis of allocating liquidity to stock markets. One can also take a macro view of the markets through index ETFs or on asset classes using assets like gold ETFs.

Advantages of trading account

Let us now look at some of the major advantages of a trading account. Here is how it can be summarized.

Everything in one place

It does not matter whether you want to execute the trade on the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), National Commodity and Derivatives Exchange (NCDEX), Metropolitan Stock Exchange (MSE), or the Multi Commodity Exchange (MCX). With the power of an online trading account, you can access all these different exchanges with one single account

Information and data you can trust

How do you invest if you cannot access the right data at the right time in the right format? Online trading platforms provide value-added services like research reports, trading calls, portfolio repair services, portfolio switch strategies, futures and options strategies, etc. In short, there is a higher probability of earning higher returns.

Narrowcasting and not broadcasting

The whole idea of an online trading account is to provide customized support to the clients round-the-clock. It can be a technical issue or another difficulty in trading platform management. You can go a step further and set customized alerts to yourself under different conditions.

Seamless Transactions, anytime and anywhere

IIFL Online Trading App has made the whole process into a single chain. The process of fund transfer and conducting equity trading as well as credits and debits to the bank, trading account and Demat account happen almost seamlessly. That is all thanks to technology.

Frequently Asked Questions

What is the eligibility for a trading account?

There is no eligibility. You must be an adult to sign the trading account opening agreement. After that you just need to go through KYC to open your trading account. Of course, it is ideal to manage risk for longevity.

What securities can I Buy from my trading account?

There is a whole choice. You can buy and sell equities for delivery, equities for intraday, index ETFs, gold ETFs, futures, options, currency derivatives etc on the stock exchange using your trading account.

Do I need to sign a POA for my Trading Account?

Under the new SEBI rules, signing power of attorney or POA is just a convenience but not mandatory. You can sell shares by using the E-debit facility offered by CDSL / NSDL to authorize debits to your demat account.