Share Trading Account

Updated on April 22, 2024
Article byNiti Gupta
Reviewed byDheeraj Vaidya, CFA, FRM

What is Share Trading Account?

A share trading account is a virtual account used to purchase and sell securities in the stock market online. For example, one can trade stocks and other securities like mutual funds, bonds, and ETFs online by using a trading account. The funds are debited from their Demat account and transferred for purchase in the market.

What is Share Trading Account

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Funds are transferred from the bank account to the online share trading account, from where the funds are used to buy or sell shares. These shares are then stored electronically in the Demat account of the holder. Therefore, a trading account acts as a bridge between multiple accounts to ensure the process of buying or selling stocks can be accounted for efficiently.

Key Takeaways

  • A share trading account is a virtual account used for buying and selling securities in the stock market online.
  • To open a share trading account, one needs to choose a broker, compare rates, complete the KYC process, fill out an application form, and have the application verified by the broker.
  • Using a share trading account requires learning the fundamentals of trading, monitoring market movements, utilizing broker services, selecting stocks, and implementing stop-loss orders.
  • Share trading accounts provide investors with a secure and advanced platform to conduct trading transactions in securities.

Share Trading Account Explained

A trading account is used to trade in various stock market instruments such as shares, mutual funds, debts, derivatives, etc. When an individual has an online trading account, they can transact hassle-free and quickly via the online platform. Nowadays, trading accounts also have updated news and other features that help investors make well-informed investment decisions. Also, the trading account provides latest financial data concerning the investor’s holdings. On the other hand, if one carries out the share trading  physically, it will take too much of time, and the cost involved will also be significantly higher.

Nowadays, most investors have access to a share trading account, from wherein they carry out trading transactions concerning securities using a secure and advanced platform. In addition, online trading accounts have made the trading process easy and quick.

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Demat vs Trading Account (Easy Explanation in Video)

 

How to Open?

The following steps are involved in the share trading account opening. Let us understand the process in detail through the points below.

Share-trading-Account

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  1. Select Broker

    The first step is to select a broker or a firm. The broker provides services concerning buying and selling securities apart from additional research and advisory services.

  2. Compare Rates

    Every broker or firm will charge different brokerage rates, commissions, and other charges. Therefore, it is essential to understand every fee charged and compare them with other service providers. Then, based on the comparison, the broker can be selected.

  3. Provide KYC

    The investor will be required to provide their basic KYC documents, such as identity proof, residential proof, income proof, and other details.

  4. Fill up the Application Form

    Along with the competition of KYC, they will also be required to fill up the application form.

  5. Verification of the Application

    The broker firm will verify the application, and once the application is processed and verified, they will provide you’re the trading account details.
    Thus, opening a share trading account is straightforward and less time-consuming.

How to Use?

Once a trading account has been opened, the investor may immediately want to start using their trading account. But as a beginner, using the account independently, i.e., without the help of brokers or experts can be challenging. Therefore, the points below can help a new investor handle their online share trading account more efficiently.

Use share trading Account

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#1 – Learn the Basics

One must have basic knowledge of the trading terms. They can learn by reading trading booksTrading BooksTrading book is the type of book maintained by the bank, financial institution or a stockbroker banks for recording the transactions of the clients who have given them an opportunity to act as the broker or middle person for dealing in securities. read more, stock market-related websites, and news channels.

#2 – Follow the Market Movements

Keep a look at the trends in the movement of the market. One can do so for the overall market and some particular stocks. It might be useful to also observe how any news related to a company affects its stock price.

#3 – Broker Services

Initially, it may be smart to take the help of brokers and independent professionals who may provide guidance with investments in return for fees. However, one should not rely entirely on them as they may not be accurate every time.

#4 – Select Stocks

After beginning to invest in the market, the investor will get an idea of which stocks are expected to do better. Then, select the stocks that look likely to do better based on the analysis, can be purchased. It is better to start small and dig deeper as time and understanding develop.

#5 – Stop Loss

The term stop loss orderStop Loss OrderStop-loss order is an advanced computer-activated trade tool that is primarily used to execute a trade for a certain stock if only the predetermined price-levels are attained while trading, i.e. it sells a specific stock when it is triggered and is useful for reducing the investors' loss burden.read more means instructions given by the investor to their trading account that the stock shall be sold automatically when the price of the stock reaches a minimum price level. Since they have decided, it is known as stop-loss. It will help them limit their losses being a new investor.

Frequently Asked Questions (FAQs)

1. What are the benefits of using a share trading account? 

Using a share trading account offers convenience, real-time access to the market, the ability to manage investments online, diverse investment options, and opportunities for potential returns on investments.

2. What are the limitations of a share trading account? 

Limitations of a share trading account include market risks, potential losses due to market volatility, transaction costs, and fees, the need for research and analysis skills, and the possibility of technical glitches or system failures affecting trading activities.

3. What is the validity of a share trading account? 

The validity of a share trading account depends on the policies and terms of the brokerage firm or platform. Typically, it remains valid as long as the account holder maintains a relationship with the broker or platform and complies with the account’s terms and conditions.

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