What are the Different types of Trading Account

In India, you get a choice to the extent that you are almost spoilt of choice. Just as there are types of traders, there are also different trading account types. These trading account types reflect the functionalities of specific trading accounts.

Here let us look at some of the most popular types of trading accounts in India. Of course, the finer points of the types of trading account may change from broker to broker but the gist of the argument is the same.

Different types of trading account

Let us now look at some of the most popular types of trading accounts available in India and offered by leading brokers.

  1. The first and most plain-vanilla type of trading account is the Equity trading account. This equity trading account allows you to trade in stocks, futures, and also in options. The equity trading account is just part of the story. You also need an attached Demat account if you want to take delivery of shares or invest in an IPO. This basic equity trading account is enough to trade futures and options. Although intraday trading does not need delivery, since it is trading in equities, SEBI insists that the Demat account must be there. The equity trading account is further divided into the cash account and the margin account.

    • In the cash account, only trades paying upfront cash are permitted. This is pure delivery and against full payment only.

    • In the case of a margin account, you can take intraday positions by paying a small margin or even buy or sell in futures and options by paying appropriate margins. This margin account is also useful when you borrow from the broker and invest.

  2. Due to the differential regulation historically, commodity trading accounts were not combined with routine trading accounts. Hence you needed to open a separate commodity trading account to be able to trade in commodities. Even though commodity trading is as simple as trading equities, separate trading accounts are a result of two reasons. Firstly, commodity futures also entail physical delivery. Secondly, till recently, the commodity futures market was regulated by the FMC, which was only moved to SEBI regulation from 2016 onwards.

  3. Depending on your comfort level you can have an offline or online trading account. The process is the same, but you just need to activate the online trading facility. Even if you prefer to trade offline, keep the online account activated so that in an emergency you can always use it. The online trading app is also used for mobile trading and does not require any separate authorization. You just need to authorize your mobile trading once and that is sufficient.

  4. You would have surely heard of terms like 2-in-1 account and 3-in-1 account types of trading accounts. What exactly are these. A 2-in-1 account offers you a single window to your trading account, bank account, and Demat account. However, you will have to regularly and routinely transfer money from your bank account into the trading account. The other alternative is the 3-in-1 trading account which integrates banking, trading, and Demat. This is only possible to be offered by bank-brokers like ICICI, HDFC, SBI, Kotak, IDFC, Axis, etc. The 3-in-1 account offers integrated Demat, trading, and bank account and hence facilitates seamless transfer of money as well as shares.

  5. Finally, you can also have Discount and full-service types of trading accounts. Now, there has been a proliferation of discount broking accounts in recent times. A typical discount broking account offers plain vanilla trading services without any value-added services. It is normally a pure online facility with just call n trade facility additionally thrown in. On the other hand, full-service trading accounts offer everything from advice, to research to stock suggestions to trading calls and even portfolio advisory and repair services.

What is the different between A demat account and a trading account?

Here is how the Demat account is different from the trading account.

  • Let us look at the nature of these two accounts first. The basic story is that a trading account is a flow while a Demat account is a stock. Shares sold or bought are stored in the Demat accounts. The trading account acts as the intermediary or the conduit between the Demat account and the bank account. The shares held in the Demat account, are taken and sold in the stock market using a trading account. Demat account is more like the savings account for stocks and holds stocks, ETFs, mutual funds, etc in custody.

  • Secondly, the functionality of the Demat account and trading account is vastly different. The function of a Demat account is to hold financial instruments like securities and shares in custody. On the other hand, the act of selling as well as buying securities is performed using a trading account. That is why, if traders only want to deal in options or futures or currency, a trading account alone is sufficient, unless you want to offer stock margins.

  • Both the Demat and Trading Account have a big role to play in the trade clearing and settlement process. For example, when you purchase shares by using the trading account, money gets transferred from a linked bank account and the shares are transferred to the Demat account. The reverse is true when the shares are sold.

  • Finally, let us take a look at the charges entailed in trading account vis-à-vis Demat accounts. There is no limit on the number of trading accounts or Demat accounts, although it is advisable to restrict to 2-3 at most for better control. There are no trading account charges except the margins and penalties if any. The Demat account attracts charges like AMC charges, custodial charges, transaction fees, Demat App charges etc.

What is a trading account?

A trading account is an investment account that allows you to deal in securities, cash, and other holdings like any brokerage account. With a trading account, the investor can buy and sell assets as frequently as they want. It offers them the window to the stock markets and can trade in equities, equity futures, index futures, index options, equity options, currency options, currency futures, index ETFs, gold ETFs, equity in cash, equity in the margin, delivery equity, intraday equity, etc. The list can go much longer.

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Frequently Asked Questions Expand All

Normally, as you go to higher levels or grades of trading accounts, you get more benefits and lower costs. Many of the charges get waived.

As of now commodity account has to be different. Currency futures can be trade with the equity trading account itself. Both currency trading and commodity trading can be done online or through app on mobile.