Opening a trading account is fundamental to starting your journey in the Indian financial markets. There are various broking firms available in India offering trading as well as Demat account services. While it is important to choose the most reliable dealer, it is paramount to open the right type of trading account.

If you are looking to only trade in the stock market, then you need an equity trading account. But if you plan on trading in the commodity market, then you need a specific account that also enables commodity trading. There are several other account types as well.

Essentially the purpose of all trading accounts is to help you place buy and sell orders. The main difference between them is the type of instrument traded and its features. So let us look at the different types of trading accounts available.

Types of Trading Accounts in India

• Equity Trading Account
• Commodity Trading Account
• Cash Trading Account
• Margin Trading Account
• Online and Offline Trading Accounts
• 2-in-1 and 3-in-1 Trading Accounts
• Discount and Full-service Trading Accounts

Knowing about all these types becomes important as each account offers specific features. As a trader and investor, you must thoroughly be aware of all these types so that you can pick the most suitable one as per your requirement.

To get a deeper understanding, let’s categorise them based on instruments traded, the methodology of trading, its interlinkage with Demat and bank account, and service.

Based on Underlying Instruments

• Equity Trading Account

It is the basic trading account that is commonly available in India. With this account, you can trade in shares, futures, and options contracts. However, it is important to note that this trading account only enables you to buy and sell the shares. If you wish to hold the shares purchased, then you need to link the Demat account which acts as a safe house for your stocks.

• Commodity Trading Account

A separate account is needed to trade commodities like gold, crude oil, etc. Since the regulatory authorities were different earlier, it demanded separate accounts. However, now equity as well as commodities are regulated by SEBI. Despite that, as per the previous norms, separate trading accounts are used for trading in this segment.

Based on Funding

• Cash Trading Account

This account is an extension of an equity trading account that allows you to buy and sell using your cash. Meaning that you can add funds from your bank account and place orders. The broker does not offer you any margin funds in this type of account. You pay for the shares purchased in full.

• Margin Trading Account

With this trading account, you can trade by paying only the margin money. The broker provides the balance funds. Both equity, as well as derivatives, can be bought and sold through this account. If you want to make use of margin funds borrowed from the broker, then this type would be your smart choice.

Based on the Method of Trading

• Offline Trading Account

In this type of account, you do not get access to the trading terminal. To place the trade, you need to call the broker’s agent and verbally ask for the price and place specific orders. Usually, it consumes a lot of time and you may lose a good opportunity by taking this long way of executing trades.

• Online Trading Account

As the name suggests, you can access this type of trading account online from anywhere. You get the login credentials to your trading platform. From there, you can track the price movement and place buy and sell orders yourself. It saves time and enables you to remotely capitalise on price movements more efficiently from anywhere.

Based on Interlinking

• 2-in-1 and 3-in-1 Trading Accounts

Three main components promote seamless trading. They are – (i) a trading account, (ii) a Demat account, and (iii) a bank account. The 2-in1 account is where the broker provides a Trading + Demat account and the 3-in-1 additionally includes the bank account as well. To buy a stock, you need to add money from the bank to your trading account. Once you buy the share, it is stored in your Demat account. Thus, these types of trading accounts ensure a smooth flow between all these components.

Based on Service

• Discount Trading Account

It is one of the most popular types of trading accounts in India. The brokerage charges in this account are the lowest. If you are a beginner, it is best to start with a discount trading account. However, you must note that there is no advisory or portfolio management service offered by discount brokers.

• Full-service Trading Account

A full-service account offers various services like trading calls, stock recommendations, financial advisory and consultation. They also provide multiple other tools and research reports that help in understanding the market sentiments better. For this, they charge a higher brokerage and comparatively high maintenance costs.

The Bottom Line

It is compulsory to have a trading account to participate in the buying and selling of financial instruments. While choosing the right type of trading account is important, it is equally vital that you choose a credible stock broker to open your account with. This is because a minor glitch during a session can be very expensive.

That’s where the reliable trading platform – Dhanush – stands apart as one of India’s finest trading platforms. With Ashika Group’s devoted service and hard-earned goodwill, over 125,000 happy traders and investors use this platform. You can create your account with zero charges and make the most of your trading career. Click to learn more.