What is a real money trading account and how to open it?

Deepika Chelani
Updated: 15 Dec 2021, 05:00 PM IST
TL;DR.

Since you cannot use a demat account for trading in foreign currency in India, you must register a separate money trading account. Let us find out what a money trading account is and how one can open it

In India, investors are required to open a separate money trading account to trade in foreign currencies.

In India, investors are required to open a separate money trading account to trade in foreign currencies.

Investing in foreign currencies is known as money trading. It's also known as forex trading or currency trading. A currency's value fluctuates in relation to another's, so traders try to capitalise on the price difference. When measured in volume, the money market or forex market is far larger than stocks or commodities.

Foreign exchange trading aids in the discovery of currency exchange rates. To protect themselves from currency swings that can significantly increase the price of doing business for foreign-exchange-dependent companies and organisations, businesses engage in forex trading.

Buying and selling currencies require a trading account, just as with stocks. For money trading in India, however, a Demat account is not required. One must have a forex trading account and a bank account. In India, the majority of popular brokerage firms offer the option of opening a forex trading account online.

It's a simple matter of buying and selling foreign currency. As per India's FX settlement system, no actual delivery of the currency is required, and all transactions are settled in cash. In contrast, a Demat account is used to store stocks, bonds and other financial instruments in electronic form.

This is the reason one cannot use a demat account for money trading in India, and one must register a separate money trading account online.

How to open a real money trading account?

Trading accounts in India can be opened by finding an established broker licensed by the Securities and Exchange Board of India (SEBI). Money trading in India is more strictly regulated than stocks.

Commissions and transaction fees are other factors to consider when choosing a broker. It is possible to lose money due to high commissions and transaction fees imposed by a brokerage firm.

You must conduct a thorough research and choose a broker that offers the lowest brokerage fees to optimise your trading account revenues. Brokers also charge account maintenance fees in addition to commissions and transaction fees.

It is advisable to make an excel spreadsheet with a list of all popular brokers and their various fees, such as transaction charges and account maintenance rates. Comparing margins and minimum account balances are two more factors that can be compared among different brokers. In this method, the most cost-effective trading platform may be identified.

As soon as one has selected a suitable broker based on these criteria, one must fill out an application form or trading account opening form offered by the relevant broker to open an account.

Then there are the KYC (Know Your Customer) standards that must be met. Documents such as a passport or Aadhaar card, voter card, or electricity bill, as well as financial/income evidence such as a copy of the most recent tax returns or form-16, etc., can be shared.

A final verification can be conducted by phone or in-person by the broker after all the forms have been completed. Verification is complete, and your online trading account is ready to trade money!

With reputable brokerage services, the entire procedure is usually done in a matter of days and is completely hassle-free for the buyer. As a result, it is important to choose a brokerage firm that has a strong reputation in the market.

In the global economy, currency exchange or money exchange, also known as forex, is one of the most common trading activities, as businesses seek to negotiate a marketplace made up of different national currencies with constantly varying values As a result of this discrepancy in value, known as the spread, traders attempt to take advantage of it.

Given how quickly the currency market changes, it is essential to have an online money trading account that allows you to stay ahead of the swiftly shifting market dynamics. The nature of money trading necessitates finding the correct broker and completing all KYC criteria prior to getting started.

To open a trading account online, simply fill out an application form and submit the appropriate KYC documents to a reputable broker.

 

First Published: 15 Dec 2021, 05:00 PM IST
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