All you need to know about Online Trading Account

A trading account is used to buy or sell equity shares in the stock market.  Previously the stock market was operated by open outcry system. The open outcry system uses hand signals and verbal communication in order to convey their buying or selling decisions. Soon the outcry system was replaced by the electronic system. 

So in an online trading system, the buyers and sellers don’t have to be physically present at the stock exchange to place orders. Instead, they open a trading account with a registered stock market broker; who conducts trading on their behalf. Each trading account is having a unique trading ID which is utilized to perform online transactions.

Online trading Account Operation

An online trading account can be understood as a link between Demat Account and a bank account of the investor. Through his online trading account, the account holder places an order for the share which, the investor wants to buy. Then the transaction goes for processing in the stock exchange.  After the processing of a transaction, the required number of shares get credited into his demat account and a proportionate sum gets deducted from his the bank account.

The selling process of equity shares is processed in a similar way. The investor places a sale order for say 100 shares with the help of his trading account. It goes for processing in the relevant stock exchange. When the transaction is processed the required number of shares are debited from his demat account and a proportionate sum gets credited to his bank account.

An opening of Trading Account

In order to conduct the sale and purchase of online shares, we need an online trading account. For equity trading online you need to open an online trading account with a stockbroker. Amongst thousands of clients, the broker may find it difficult to give your personal attention. The trading account makes the whole investing job more convenient.

Steps for opening an online trading Account

According to the present scenario select a broker having a good reputation in the stock market regarding order execution of the shares. This is necessary to tap the opportunity at the right time.

Every broker charges a certain amount to process the share orders. So to grab a good deal, the interested individual can draw a comparison of brokerage rates across the region. Also, inquire about the discounts available to enjoy better services at reasonable rates.

Contact a brokerage firm and enquire regarding the procedure to open a trading account.

A representative of the brokerage firm will visit your house according to your suitable timings and they will give two forms, the account opening form, and KYC (know your client) form. You need to fill these two forms and attach the relevant documents with it.

  After the submission, the firm will verify your personal details either through an in-person check or over the phone.

Once your application is processed, you will be provided with details of the trading account.

Documents required for a Trading Account

The online trading account acts as an interface between the investors’ Demat account and saving bank account. There are certain documents which every investor need to submit according to the need of the brokerage firm. The procedure and the documents are mandatory for the Demat Account opening.

List of documents that investor need for opening a trading account:-

Income Proof

Anyone of the listed documents will be considered as proof of income.

The Xerox copy of Income Tax Return (ITR) Acknowledge slip submitted to the Income Tax department during the tax filing process.

Certificate of the net worth of the investor, or the Xerox copy of annual bank statement authenticated by Chartered Accountant.

Form 16 or the salary slip of the current month

Last 6 months bank statement

Through self-declaration investor need to give proof of assets Ownership.

Identity Proof

Anyone of the documents investor needs to submit as his proof of identity.

PAN Card, having a valid photograph

Aadhaar card / Voter ID card / driving license/ Passport.

Any Photo Identity Card issued by the Central/State Government and its Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, Public Financial Institutions, University affiliated Colleges, Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council, and Credit/Debit cards issued by Banks.

Address Proof

The investor can submit any one of the listed document as his address proof

Passport/Voters Identity Card/Ration Card/Registered Lease or Sale Agreement of Residence/Driving License/Flat Maintenance bill/Insurance Copy.

The current telephone landline bill, electricity bill, or the gas bill can be submitted. But it should not be older than 3 months.

Xerox copy of Bank Passbook, but it should not be older than 3 months.

Address proof issued by Bank Managers.

Address proof is given in the name of spouse.

Any identity card containing investor’s present address issue by Central/State Government and its Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, Public Financial Institutions, University affiliated Colleges, Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council.

Benefits of Online Trading Account

With online trading account, the traders make all their decision on their own. Such trading approach differs from using a stockbroker, as the broker typically offers his advice and effort in terms of guidance. How to trade does not matter, but every online trading is having pros and cons.