What is trading account?
A trading account is opened with a SEBI registered broker and the trading account
is used to execute buy and sell transactions on the stock exchange. A trading account
is like a flow account and it cannot hold shares. You can only transact in the trading
account and the trading account is a must if you want to execute transactions on
the stock exchange. Brokers, normally, open a Trading-cum-Demat account where the
same set of documents are required as the demat account. In fact, a single set of
documents is sufficient to open your trading and demat account with the broker.
While the trader is free to open trading and demat account at different places,
it is always advisable to have your trading and demat account at the same place
for the sake of ease of transactions.
A trading account is a flow account; in the sense that it records flows of transactions.
Only futures and options transactions are held in the trading account since these
are contracts and do not represent ownership. Any security that represents ownership
like equities or ETFs have to necessarily be held in your demat account only. A
single trading account can be used to execute transactions in equities, ETFs, index
futures, index options, stock futures, stock options, VIX futures, currency futures,
currency options etc.