Knowing the difference between Demat and Trading Account is essential for every stock market investor. As a new trader or investor, understanding the difference will help you open the most appropriate Demat and Trading accounts and start your fortune building adventure.
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What is a Demat account ?
A Demat account is often referred to as a Dematerialized account. In other terms, maintaining a Demat Account entails transforming or dematerializing your physical stocks into a digital format. A demat account is utilized to store digital stocks and assets of publicly listed firms.
You can keep a broad range of assets in a Demat account, including bonds, equity stocks, government securities, mutual funds, and exchange traded funds. A Demat account, like a bank account, is generally credited or debited when you purchase or sell stocks of a firm.
It not only reduces unnecessary documentation, but it also assists to simplify the stock trading operation.
Important of Demat Account
- Your Demat Account can be used to hold a broad range of investment assets such as equity stocks, mutual funds, government securities, and exchange traded funds.
- It enables you to perform a variety of things like trading and investing, with the touch of a button.
What is a Trading Account?
A trading account is a financial account that, like a normal stockbroker account, contains stocks, funds, and other holdings. A client can use a trading account to purchase and sell securities as often as they desire, all within the same trading day.
The frequency of trading action, the objective of the trade, and the risk associated in the trade are among the major aspects that separate a trading account from other financial accounts.
Users of a trading account generally engage in day trading and are frequently seen executing long-term buy and hold methods. As a result, you’ll need a specific account through which to perform trades. This is referred to as a trading account.
Important of Trading account
- To simply stated, a Trading Account connects your bank account with your Demat Account, enabling you to trade in stock markets.
- Having an online Trading Account allows you to enjoy entry to several stock exchanges such as the National Stock Exchange (NSE), the Bombay Stock Exchange (BSE), the National Commodity and Derivatives Exchange (NCDEX), and the Multi Commodity Exchange (MCX).
Difference Between Demat and Trading Account
| Basis | Demat Account | Trading Account |
| Use | It is used to hold stock and other financial assets. | It is used to trade in Intraday trading. |
| Charges | Annual charges are applicable. | It is mostly free of charge. |
| Requirement | You don’t trading account with a Demat account. | You don’t need a Demat account for trading accounts. |
| Suitable | It is suitable for long term investing. | It is suitable for Intraday Trading. |
| Risk | Risk is low in Long term trading. | Risk is High in Intraday Trading. |
| Role | To keep your investment safe. | To keep your Intraday trade safe. |
These are major difference between Demat and trading account (demat vs trading account). Now let’s understand how to open them.
How to Open a Demat Account manually ?
- Step 1: Approach any Depository Participant (DP) who acts as the depository’s agent. Their list can be obtained on the Central Depository Services (India) Ltd and National Securities Depository Ltd portals.
- Step 2: Complete the account registration form. Provide the necessary documents for evidence of address and identity.
- Step 3: You must now sign a contract. This agreement will outline your rights and responsibilities as an investor/DP. Don’t forget to obtain a copy of the agreement as well as the list of associated charges.
- Step 4: Congratulate yourself! Your account has been set up. A Beneficial Owner Identification Number, commonly referred as a Demat Account Number, will now be issued to you.
How to Open a trading account manually ?
Opening a trading account can be explained with the help of these simple steps:
- Step 1: Select a broker/firm of your choice by comparing the different service charges and brokerage rates.
- Step 2: Inform the broker that you wish to Open a trading account
- Step 3: Fill the account opening form. Here, you are required to provide the requisite documents, including KYC details, address and ID proof.
- Step 4: Now the authorities will verify your application. The application verification process may take some time.
- Step 5: You will now receive the details regarding your trading account.
- Step 6: Congratulations! You are all set to begin your journey of trading in stock markets.
How to open Demat and trading Account Online?
You can check out below video to know the process of opening Demat and Trading account online:
How does Demat and trading accounts work?
To begin buying securities in the share market, you should first fund your trading account. You put a balance in your trading account by debiting your bank account via NEFT/RTGS/IMPS/UPI or an online payment transfer. This margin can then be utilized to purchase stock.
If you buy stocks on Intraday then you must square off the position before 3:20 or the broker will charge you a penalty and will square off your position.
While in Delivery once you buy the stock it will take T+2 days to credit in your account. However, money will be blocked from your account once you buy the stocks.
if there is an issue you must address it to your broker within the same trading day to solve the issue.
Advantages and disadvantages of Demat and trading account
| Advantages | Disadvantages |
| Easy and quick settlement of stocks | Dishonest brokerages can do fraud easily. |
| Possibilities of error are rare to rare like in paper stocks name etc errors were common. | it is just a click away so mostly people check it again and again which ruins their long term plans. |
| You can do more traders in less time. | You need a technology friendly person to operate it. |
| It is a one stop solution for all your assets including stocks, bonds , mutual funds etc. | There are many costs associated with it like transaction cost, maintenance cost etc. |
Conclusion
As a result, in order to hold your stocks digitally, you must have a Demat Account. A trading account is also required to trade in share markets. Both are separate but essential elements of the entire transaction.
following opening Demat and Trading accounts, You must begin your trading with a full knowledge of the trade and its products.
This is all from our side regarding what is the difference between demat account and trading account. Although, if you have any doubts about trading account vs demat account you can just comment below.
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FAQ About demat and trading account difference
How to open trading account?
Find any SEBI registered stock broker online and offline They will do all the process for you. However, Keep your aadhar card, pan card and aadhar card linked mobile number ready.
Trading account meaning?
Trading account means a account which help you in trade in Intraday trading. it is like a bridge between bank account and demat account.
Difference between demat and trading account in hindi
डीमैट खाते का उपयोग स्टॉक और अन्य वित्तीय संपत्तियों को रखने के लिए किया जाता है और ट्रेडिंग खाते का उपयोग इंट्राडे ट्रेडिंग में व्यापार करने के लिए किया जाता है।
Best Demat account for long term investment?
If you need best demat account for long term investment then open account with any reputed discount broker.
Major Disadvantage of Demat and trading account?
You need a technology friendly person to operate them.
