A trading account is an investment account that holds securities, cash and other holdings like any brokerage account. With a trading account, an investor can buy and sell assets as frequently as they want, that too within the same trading session. Some of the key elements that differentiates a trading account from other investment accounts are – the level of trading activity, the purpose of the activity and the risk involved in the activity. Typically, holders of a trading account are involved in day trading and are often seen exercising long-term buy and hold strategies.
For this reason, you need a special account through which you can conduct transactions. This is called the trading account. Without one, you cannot trade in the stock markets.
What is the difference between trading account and demat account?
A trading account is used to place buy or sell orders in the stock market. The demat account is used as a bank where shares bought are deposited in, and where shares sold are taken from.
Example: You have Rs.100 in your wallet. You go to a shop and tell the seller that you want a packet of chips, you check the price, and finalize the transaction. Then, you take the money out of your wallet and give it to the seller. In this case, the wallet acts as the demat account, while you act as the trading account.