A Demat account means a virtual account used to store stocks and other financial securities in an electronic form. A Demat account is an account for converting securities into an electronic form from the physical certificate format. During online trading, a share is bought and sold through the Demat account to provide an easy trade experience to users. Demat full form is a dematerialized account.
To perform trading activities one is necessarily required to open a trading account. When the company lists its shares in the market one can trade them on an electronic system via a specific account known as a trading account. One can register with a stockbroker. In a trading account, one is provided with a unique trading ID to perform trading transactions.
Comparison between Demat & Trading Account:
The difference between Demat and Trading account is as follows:
The Demat account is for storing securities in an electronic format whereas a trading account is for buying and selling of securities in the stock market. A trading account is useful for derivative trading purposes as well.
Tracking of Account:
The transactions in the Demat account are analyzed every year while in the trading account it is measured over some time to keep a regular check on your transactions.
The purpose of the Demat account is to provide secure and safe storage of securities in electronic format. On the other hand, a trading account is used to complete the transactions of buying and selling in the market.
Number of Accounts:
One can open multiple Demat accounts with different brokers while trading accounts for one investor cannot be multiple.
When you buy stocks of the company, funds are deducted from the bank account and stocks are credited to the Demat account. When you sell stocks via a trading account, stocks are debited from the Demat account and put in the market for selling purposes.
Opening of a Demat account:
- To open a Demat account the steps are mentioned below:
- Select the depository participant registered with CDSL or NSDL
- Visit the website or the mobile application of selected depository participant or stockbroker
- Fill in the basic details such as name, mobile number, and email address
- Submit the required documents for opening a Demat account such as proof of identity like Voter Id and proof of address like AADHAR Card
- Document verification and KYC process to be completed
- Sign the agreement about the information of specific rights and duties of you as an investor and for depository participants.
- Finally, a Beneficial owner Identification number will be shared to you commonly known as Demat account number
Benefits of Trading Account:
Through trading accounts, one can have access to multiple stock exchanges in the country. Some of the exchanges are National Commodity and Derivatives Exchange (NCDEX), Bombay Stock Exchange (BSE), National Stock Exchange (NSE)
One can place orders online for the buying and selling of securities. One can access the account in different ways and traders can trade during market hours and even after market hours
Benefits of Demat Account:
Demat account is safe as it reduces the chances of loss of physical certificates
Demat account reduces paperwork and one can avail loans against the security in the Demat account.
If one is taking trading in the stock market as a profession it is highly advisable to open a trading account with a reputed stockbroker. However, to trade in the stock market both the accounts - a trading account and a Demat account are necessary.
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