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If you are active in the stock markets, the one you want to be constantly updated is the trading account balance. How do trading accounts get debits and credits? For example, when you sell shares or when you fund your trading account, there is a credit. On the other hand, when you withdraw cash from the trading account or when you pay for purchases, there is a debit.
Normally, there is also the trading account margin that is blocked in case of intraday or margin trades or if you are active in F&O. Also, you must be familiar with how to check trading account balance online, offline, and via a mobile app so you have 24X7 access to your trading account updated position.
When you go to the trading account net balance link on your online account or in your trading app, there will be several different references to the trading account balance. Let us get familiar with all of these.
The trading account balance tells you the opening cash margin that is available for use either for delivery or for intraday. You can plan your positions for the day accordingly or infuse additional funds.
It also shows the margins that are used or locked for trading purposes and cannot be used. This includes F&O margins including the MTM margins.
There is something called notional cash limit which is the proceeds of sale before T+2. This can be used to take positions or as margins, but cannot be withdrawn.
The most important column is the Net Available Margin column that shows the exact clear cash balance available to you.
Why do you need a trading account in the first place? It is essential to conduct stock trading activities. Any listed share can only be traded through the electronic trading system through a trading account. For example, you can directly sell shares from the Demat account, but it has to be routed through a trading account only.
The trading account also acts as a bridge between your bank account and Demat accounts and allows you to place trade transactions. Trading account flows are crucial for clearing and settlement. Normally, trading accounts are easy to maintain as there is no cost involved, unlike a Demat account that attracts AMC charges.
Here is the process to start trading in the stock markets in India.
Open a Demat account and trading account. You are not allowed to trade in equities without a Demat account. You can understand the Demat account as a bank account where you hold stocks instead of funds.
As a second step, understand the nuances of stock quotes. What is meant by the low price, high price, closing price, last price, open price, etc? Also, understand how to interpret volumes and understand the basics of technical charts.
Get familiar with Bids and asks as well as bid-ask spreads. They give you the best idea of risks in trading in the stock markets.
Don’t have to jump to being an expert. Get basics of company valuation, P/E ratios, EPS / DPS, dividend yields, supports, resistances knowledge. It will help you.
Stop loss is like religion in the stock markets. Better to take a small loss than a huge loss. Always set a stop loss while trading. Failure to put a stop loss may damage your capital heavily.
Talk to your broker, advisor, sales advisor, analyst, etc. But the final decision should be yours based on your risk/return profile.
Start with safe liquid stocks that are available in the Nifty or Sensex. They have established names and you have a safety margin with them.
Yes, there is nothing stopping you from having multiple trading accounts. However, too many trading accounts can get unwieldy. Restrict it to 2-3 at the very maximum.
The process is the same as checking through online interface.
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