Types of Trading Accounts and Demat accounts

A trading account is the first way to build a relationship with a broker. To hold, buy or sell stock in the stock exchange, you need to create a trading account as well as a Demat account . You need to know about a number of accounts including what is a BO ID, trading account, Demat account types, and the different classes of accounts. These are just a few of the things you should know.

Types of Demat accounts

There are basically three types of Demat accounts:

1. Regular Demat account for traders who live in India
2. Repatriable Demat account - This account is for non-resident Indians and allows funds to be transferred abroad. This type of Demat account needs an associated NRE account.
3. Non-Repatriable demat account: Also for non-Resident Indians. This account cannot be used to transfer funds abroad and requires an NRO bank account.

Either a trading account only or a Demat account only

It is common to believe that you must open both a Demat and trading account simultaneously. You can open one or both of these accounts. If you only want to invest on an IPO, and Demat accounts are sufficient. After the shares have been allotted, they will be credited in your Demat account. Only problem is that the shares cannot be sold unless you have trading accounts. If you're buying shares solely with the intention of keeping them long-term, then a Demat account is enough. A Demat account is not necessary if you are only interested in trading futures or options. F & O is not available for trading accounts. A trading account will suffice. Only when you wish to hold equities, do you need a Demat account?

Commodity trading account and Equity trading account

You can trade in options, futures, and equities with your equity trading accounts. It is not currently possible to trade commodities in your existing equity trading account. A separate commodity trading account will be required, which you must open with your broker. This is due to the fact that commodities used to be under different regulations in the past. The FMC has been merged into SEBI in the past 2 years. In addition, the regulation of the commodity markets was brought under SEBI. As the regulator looks to integrate the commodities and equities segments, this could change. Interesting to note is that currency derivatives may be traded in an existing equity trading account.

Online trading accounts versus offline: 2-in-1 account or 3-in-1?

Let's take a look at the main classification. Online trading accounts are traditional accounts that don't offer internet trading. Call your broker, or go to their office to trade. Online trading is available through the online accounts. Online trading allows you to trade from the comfort of your own home or office via your computer, laptop or smartphone. Online accounts tend to have lower brokerage, and are also more convenient for traders.

Let's also discuss the differences between 3-in-1 and 2-in-1 online trading accounts. The 2-in-1 trading accounts essentially combine the trading account with the Demat account. So, when you buy shares from your trading account, the transfer to your Demat account on Tuesday T+2 day goes smoothly. The same applies to selling shares. On T+1 day, your Demat account debits are made. Brokers that are part of the group's banking operations can offer the 3-in-1 account. Because of their banking interface, ICICI Securities and HDFC Securities as well as Axis Securities and Kotak Securities can all offer 3-in-1 accounts. Although 2-in-1 accounts are essential to maintain a seamless trading-demat relationship, 3-in-1 accounts do not offer any significant advantages. Most broking platforms allow you to transfer funds seamlessly into your trading account.

Full-service trading accounts are better than discount broking accounts

This distinction has been gaining prominence over the past few years due to the emergence discount brokers, who trade large volumes at very low costs. These discount brokers don't offer any additional advisory or research services. These discount brokers offer only execution of trades and can offer very low brokerage. These discount brokers don't offer an offline option for placing trades, except for a call-andtrade service, which is charged in most cases. However, the full-service model charges a higher brokerage, but offers a variety of services. You can get research, short-term calls and an advisory desk to assist you in any position. You will receive these premium services if you choose a full-service trading account over a simple discount brokerage account. The trading account allows you to trade on both the BSE as well as the NSE. However, the commodity trading account lets you trade on the NCDEX or the MX. You will need to open separate commodity trading accounts and separate commodity Demat accounts for commodity trading.