The Hindu Business Line : Get a better grip of your trading account

The first, and perhaps one of the important, step in investing is selecting a broker. We had discussed about the importance of choosing a good broker last week. As we take this forward, we list out a few more nuggets that would throw light on how to choose the right broker.

Go online

Typically, an online trading account is linked to a depository participant (DP) and bank account. Find out in which banks your broker has a tie-up with. If you do not have an account in one of those banks for trading, you may need to open one. You can also consider opening a three-in-one account offered by some brokers, wherein all the three accounts are opened with the same organisation. This not only helps to transfer money but also to redeem the sale proceeds when you sell stocks from your portfolio.

However, the two most important aspects that determine the effectiveness of e-broking platform are the trading software and customer service levels that the broker provides. To begin with:

Understand how to place orders, modify and cancel them.

Learn how to verify your ledger balance, get details of transactions and, in general, learn to navigate through the software.

Get a grip of the nuances of transferring money online — both to and from the trading account.

In short, make sure you get a good demonstration of the trading software from your relationship manager before you start trading.

Since online trading reduces the human interaction you would otherwise have had in an offline account, the customer service team plays a key role in redressing any problem. Remember to speak to the customer service personnel to get an idea of the competency of the team.

Find out from your prospective brokers on how they usually handle a `market meltdown'. This occurs when the market rises or falls rapidly and the broker gets loaded with orders five-10 times the size of normal orders. In such cases, the broker should provide you with an alternate means of placing orders. Most brokers offer what is called phone trading to help their clients during such an untoward exigency. However, these phone trading options are sometimes charged.

Find out if the broker will give you an option to place orders before the market opens for the next day. Commonly called the "after market orders", you can use this option to place your order the previous day itself when you foresee a busy day ahead.

Try to get details regarding the various trading products that are offered by the brokers and find the one that suits your profile. While some brokers offer a variety of trading products others offer only the basic trading product.

But, most important, make sure you can access your trading account from your office during market hours, since some organisations block access to such accounts for security reasons.

Stay Offline

An offline account is the traditional broking account, wherein you place orders with your dealer either by walking to the office or over the phone. Traders and high net worth individuals with a need for fast and professional execution of orders can consider such options. Since the dealer plays a key role in this model, find out if your dealer is good at execution of orders and is pro active in information sharing. Remember the dealer's experience in the market is also a crucial factor. You might also want to negotiate on the trading exposure and the fee that is charged. Unlike the online model, offline brokers are more flexible with the exposure and the brokerage charged.

With markets soaring almost every second day, if you think it pays to be an investor, it certainly pays better to be an informed investor. But always remember to stick to brokers with established credentials in the market.

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