Prerequisites Before Trading in Stock Market

Prior to trading in the stock market, one needs to be well equipped with certain essential documents. Here are a list of essentials one must have to start trading in the Indian Stock market.

Pan Card

To do any financial transaction in India, you must obtain a Permanent Account Number (PAN). 

It’s needed to open a bank account, make investments, and file income tax returns, among other things. It is a one-of-a-kind number assigned by the IRS to an individual for the purpose of determining his tax responsibilities in all financial transactions.

Broker

You cannot make any stock market transactions directly on the stock exchange. You must open a share trading account with a registered broker with SEBI and the stock markets.

Demat & Trading Account

You will also need to open a Demat Account, apart from a Bank account where you will be able to hold all of your shares and securities in your name. You can no longer own stock certificates. 

As a result, if you want to hold all of your securities in an electronic (dematerialized) form, you’ll need a Demat Account. To buy and sell the shares, you’ll need a trading account. All of this is usually handled by the broker. As a result, when you approach a broker, your Demat account and trading account are both opened at the same time.

Linked Bank Account

As you are choosing to invest in stocks, you will be buying and selling them over time. For this, you will require a bank account that is linked to your trading account. This ensures that money flows in and out of your account seamlessly while you trade. This is mandated by most brokers with whom you will choose to open a demat and trading account.

These days you can find two in one accounts that serve as both a Demat account and a trading account. Some brokers also offer three in one account where one can trade directly from their bank account and store their securities in the same location.

Although it may appear hard to newcomers, the procedure of investing in stocks for beginners is pretty straightforward, as described above. Before jumping into the stock market, keep in mind that knowing your investment horizon and financial goals is critical.