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Traders and investors are expected to know the difference between trading account and DEMAT account in share market because they will need the two accounts for their share trading in India.
In a simple language, the difference between trading account and DEMAT account in the share market is that while a trading account is regarded as the interface, a Demat account is a storeroom.
The buying and selling of shares on stock exchanges including BSE and NSE is done via trading account or interface.
When the share are bought, they are transferred to the Demat account for safekeeping or storage.
Upon sales of the shares, the Demat account is debited to the tune of shares sold. This is how to illustration the difference between trading account and DEMAT account in share market.
There are quite a lot of opportunities associated with the share market when it comes to money-making and wealth creation.
In other words, irrespective of your qualification, status or profession, you need to invest in one trade or another to create wealth.
It is noteworthy that the salary you are earning from your 8 am to 5 pm job is not enough to create wealth and free you from a financial mess.
In some cases, it is not enough to take care of unanticipated expenditures that may arise later in life such as unexpected loss, emergency as a result of ill health, and post-treatment among others.
The only way you can overcome poverty in life is to plan your finances properly, according to your objectives and needs.
Adequate and effective financial planning will give you the financial freedom you need to move ahead in life.
Trading in the stock market is one of the best and fastest ways to gain financial freedom and provide you with all the resources you need to meet all your future emergency expenses.
The trading exchange will grant you access to some financial resources and instruments such as the IPOs, derivatives, and stocks among others.
Once you have decided to engage in exchange trading, then the Demat account and trading account opening become mandatory.
Hence, trading in exchange becomes merely impossible without a trading account and a Demat account in India.
It is noteworthy that these two accounts are not the same and they are both meant to serve different purposes when it comes to stock trading.
In addition to these two accounts, you are also required to have a bank account before you can begin to trade in the stock market.
You must link your bank account to your trading account online to enable you to purchase or sell shares.
For a better understanding of how the system works, we will give you a clear picture of what a Demat account and a trading account is all about and the difference between trading account and DEMAT account in share market.
Keep reading to learn more!
Trading Account Overview
Trading account is the account opened with a brokerage firm at the point of starting to trade in derivatives, IPOs, and stocks among others.
With trading account opening, you are authorized by stock trading platforms to have an unlimited trading opportunity.
These stock trading platforms are used for buying and selling financial instruments in different exchanges and you can get them on mobile and web.
A trading Account in India resembles the so-called brokerage investment account that keeps cash, securities, and some other available holdings.
Investors and stock traders alike can trade assets as often as they like, using one trading account online, all in the same trading period or session.
An important fact to note here is that the trading activity level, the major reason for such an activity, and the associated risk are a number of the major elements that distinguish or separates a trading account in India from other available investment accounts.
In general, trading account online holders in India carry out daily stock trading and implement lasting hold and buy techniques.
Moreover, the trading account is such a unique account type that allows for easy dealings and transactions.
As mentioned earlier, taking part in stock market trading will not be possible if you don’t open a trading account in India.
When you open or sign up for a trading account online with a brokerage company, you will be provided with a peculiar and special trading ID.
It is this special ID that you will use to carry out all your trading activities on the platform.
Trading Account Opening Process
Opening a trading account online is a breeze, but it requires some steps. Follow the steps below to register for a trading account opening in India.
Look for a reputable and trustworthy stock broking company of your choice that will take all your orders seriously.
Time is money as far as the stock market is concerned. Therefore, the brokerage firm must always be ready to execute your orders early enough.
Take note that brokerage charges vary among brokers. Therefore, evaluate processing charges and brokerage rates charged by brokers before you open an account to trade with such a broker.
Quite a number of these brokers offer discounts based on the total sum of trades executed while some of them charge less and some charge at an exorbitant rate.
Put all these factors into consideration before you enter into the contract of stock trading.
Nevertheless, it is noteworthy that when it comes to opening an account for stock trading in India, choosing the broker with reduced fees is not mandatory.
Higher charges that will offer the utmost quality service is all you need to succeed.
Contact your desired brokerage company in India to request for trading account opening process.
It is at this stage that you will be provided with the KYC otherwise referred to as Know Your Client form to fill.
Complete the form accordingly and forward it back to them attaching the evidence of where you reside and your means of identification.
The brokerage firm will authenticate all your claims and by any means operating in their system and inform you to disclose to them your private information.
Finally, your trading account information will be revealed to you upon the approval of your application.
This is the time you can start trading in the stock exchange market.
Demat Account Overview
A Demat account is a type of account which shall safeguard and keep all the shares that you own in an electronic set-up.
You can also describe it as a location where all your holding certificates are kept online.
It is an account that changes all the physical shares you are holding to the electronic type of shares.
Demat account opening will grant you access to a unique account number that will allow you to carry out trades electronically.
In this system, the Indian central depositories are responsible for managing all the available Demat accounts, while the brokerage firms are third parties or agents between the central depositories and investors.
Normally, you are issued a certificate anytime you purchase a financial instrument.
This certificate is then credited to your account automatically.
Your Demat account is already connected to your trading account online. On the other hand, when your holdings are eventually sold, the account is debited.
A great thing about any Demat account opening is that you are not expected to have a share balance before you can register for one.
With a nil balance in your share trading account, you can open a Demat account in India.
Steps to Demat Account Opening
Demat account opening is a breeze in India. Follow the step below to open one today!
Look for a depository participant or the intermediary of a depository to complete the much-needed form for the Demat account opening.
The list of approved DPs or Depository participants is accessible on the websites of the depositories.
Complete the account opening form accompanied by copies of the evidence of your place of abode and means of identification.
Endorse the contract that enumerates the details and features of your obligations and duties as an investor with the DP.
You have every right under the law to get a copy of both the schedule and the signed agreement as associated with charges to serve as a reference.
At this stage of the account opening process, your account will be opened by the DP.
Furthermore, you will be issued what is referred to as the BOIN (Beneficial Owner Identification Number) or a Demat account number.
Why Demat Account and Trading Account?
Having understood the difference between trading account and DEMAT account in share market, you need to know why it is important to open a Demat account and a Trading account for share trading in India.
Stock traders and investors normally transact their stock trading businesses in the stock exchanges through verbal bidding for financial instruments before digitalizing the stock exchanges.
At this period, hard copies of their investment certificates were normally issued to them.
But with technological development in the stock trading industry, the whole system was transformed in the NSE, BSE, and MCX segments.
This brings about the need for both a Demat account and a trading account.
With your trading account online and the Demat account, you can trade from any location.
A trading account is indispensable to boost online stock trading. On the other hand, a Demat account is a must-have to enhance the movement of certificates of financial instruments.
Difference Between Trading Account and DEMAT Account in Share Market
The difference between trading account and DEMAT account in share market are as described in the table below.
|Trading Account||Demat Account|
|Functionality||A trading account India allows for easy trading of financial instruments in all the exchanges. You can use it to place either a buy or sell order.It links together both of your Demat and bank Accounts.It withdraws your share from your Demat account and sells the same in the stock market.Used for making a purchase of shares with the funds from your bank account and the shares are then credited to your Demat account.||A Demat for the storage of Bonds, Shares, and Mutual Funds you bought from the market in an electronic system. It functions like a saving account.Shares sold are taken from your Demat account with the sales proceeds added to your bank balance. |
|Controlled by||The Brokerage firms||The Central Depository with the brokerage firms acting as agents or third parties.|
|Types Available||Two in one and three in one account||Just only one account|
|Cost||No charges for managing the account except for the legal and charges levied by the brokerage firms||Charges are attached even for managing an idle account.|
Best Brokers to Open A Demat Account and Trading Account in India
When it comes to trading account online and Demat account opening in India, there are many stock brokers available to choose from.
Some of these stock brokers provide perfect trading and demat account opening services with a reduced brokerage.
Here are some of top brokers you can turn to if you want to open a Demat account or a trading account in India.
As far as online oriented discount brokerage is concerned in India, Zerodha is the originator and pioneer.
It is a leading platform and the broker with the largest population of customers in India.
The trading account and Demat account opening charges at Zerodha is a onetime fee of 200INR for Demat and trading account online opening.
It is FREE to maintain a trading account while the charges for maintaining a Demat account amounted to 300INR.
II. Angel Broking
If you are compiling the list of all the leading full-service brokers in India, Angel Broking will be one of them.
It is one of the best brokers for opening Demat and trading account in India.
At Angel Broking full-service brokers, there are no charges for trading account opening and Demat account opening.
III. The ICICI Direct
This is a trusted and household name when it comes to corporate bonds, mutual funds, stock investing or whatever can be traded on the stock markets.
If you are planning to start share market trading, you must first understand the difference between trading account and DEMAT account in share market and be aware of the fact that opening a trading account and Demat account is mandatory when it comes to stock exchange investment.
In other words, these two accounts are a must-have for all stock traders.
These two indispensable accounts are what qualify you for registration with the stock exchanges in India.
Your Demat account keeps all your available stocks, while your trading account in India simply tracks all your stock flows.
Trading Account Opening guarantees a flawless trading process and makes the collection of physical orders from clients on a timely manner possible.
With trading account online, buy and sell orders online or on your phone is made easy.
All you need to open these two accounts include legal evidence of your identification and place of residence.
Different types of documents are usually accepted for this purpose and you can contact your intended brokerage company for more information on this.
You will be issued with a customer ID and password immediately your application to open these accounts is approved.
It is this information you will use to sign in to the trading platform. You can start trading in shares with your accounts.
To simply the whole process, make sure you open both the trading and Demat accounts simultaneously.
Link your bank account to your trading account in India and start trading flawlessly!
FAQs about Demat and Trading Accounts
Is it possible for me to maintain only a trading account or Demat account India or the two accounts?
The fact is that you must have a trading account if you want to carry out share trading transactions.
Demat account is perfect for you if you only want to hold shares whether they are transferred or innate.
The bottom line is that maintaining a Demat and trading account is recommended.
How does the trading account in India and the Demat account works?
Whenever you buy shares, the value of the shares is added or credited in your Demat account India.
On the other hand, the value of shares sold by you is removed or debited to your Demat account.
Nevertheless, a trading account in India is merely an execution account.
Is it allowed to operate a Demat and trading account online?
Operating a Demat and trading account online is acceptable.
How can share transactions and ownership be approved?
The procedure is that you are issued with a Demat Statement of account every month, upon opening a Demat account.
This account serves as acceptable evidence of your holdings.
In the same vein, you will be issued with contract notes any time you trade shares (buy/sell) in your trading account.