Technology advancement has changed a plethora of sectors over the past two decades and has acted as a disruptor on several occasions across the globe. Ideally, the financial industry is one of the sectors that has seen a sea change through the advent of technology has been broking. Technology has brought transparency in the sector and helped enhance the reach to clients across the nation and bring down the experience considerably.
It has been possible through online broking where the patrons themselves to buy and sell orders using internet-based mediums using their computers or mobile without calling the brokers for almost all the executions.
It is nothing surprising to know that market share online brokers now account for the lion’s share of the retail broking market, all thanks to the low rates and ease of doing business.
Things to know when making a trading account online:
Select a broker online:
Online brokers tend to offer lower brokerages as compared to offline brokers, but you must know that not all online brokers are the same, and to pick up an online broker, you need to look at other factors besides the brokerage rates.
The trading platform that the broker tends to use is likely to decide the ease of entering and exiting orders besides the speed. Ideally, a broker with a strong trade engine is to be chosen as social media scan or reviews can be helpful to determine which broker offers a strong trading account.
These days a plethora of brokers are offering charting facilities with their broking account as they view chart prices and can directly trade from the charts, and the best part is that it has eased trading further.
A plethora of brokers these days, significantly since the Covid-19 lockdown, have streamlined their account opening process. They are done through an online process that requires the submission of mandatory information and documents through the internet. And the move has definitely minimized the account opening time, and in several cases, it has been done within no time.
While opening an account, you need to be clear on which segments he is interested in or would like to trade in the future. If you are only interested in trading in equities, that too in the cash segment, there is no need for you to open an account in the derivative, commodity, or currency segment.
The documents needed for opening an online broking account are pretty standard. Still, they are likely to from broker to broker, and documents include PAN Card, Aadhar Card, address proof, a mobile linked to Aadhar Card, besides bank statement, canceled cheque, and photographs.
Besides trading account, you also need to open a Demat account from where their shares will be credited and debited as you can trade on the best trading app. While you can have a Demat account with another broker or a bank, it is advisable to have the trading and Demat account with the same broker to enable smooth functioning and saves you a lot of time and stress.
Further, it also helps protect you from the occasional auctioning of your shares in case you forget transferring them or are unable to do so for a plethora of reasons.
Online brokers tend to offer different types of brokerage plans to align with the requirement of different kinds of other clients, and it depends on the volume or frequency of trade; you can choose from the various types of brokerage plans available.
Some of the most common brokerage plans in the industry are ideal fixed brokerages, monthly brokerage plan, and unlimited brokerage plan besides other. Brokerage plans are likely to differ from one broker to broker, and you need to compare them carefully before choosing them. Brokerage rates are quite different in almost all the market segments, including cash, derivative, forex, and commodities, and tax charges are likely to be different in all of these segments and will be charged at actuals as given by the respected authorities.
A plethora of brokers or finance sites have a brokerage calculator, which helps you see how much brokerage will be given for your transaction. Still, you must have this at the back of your mind that these calculators will be considering the tax and other mandatory charges as per the Ministry of Finance.
Ideally, it is the amount you have to keep with the broker based on which the limit is assigned for trading, and margins can be in various forms, including cash fixed deposits, among others. You need to check with the broker before opening an account about which mortgages are allowed with them as margins. Brokers tend to use margins as a tool to attract patrons.
Online share trading:
Online share trading is all about buying and selling shares in the cash market, and you will have to specify what kind of trade will be given at the time of the transaction. You need to understand the different types of orders the brokers offer before starting trading, as there is various nomenclature for intra-day and delivery trading with brokers.
Online trading in Derivatives:
You can start online trading that is allowed in futures and options segments, besides trading methodology remains more or less in cash. Now, SEBI has strict margining norms.