All About Demat and Trading Account Difference

What is the Difference Between Demat and Trading Account?

 

Hi all today I am going to write about the Demat and trading account, one day I went  to my best friend home, his father is very interested in the stock market he was asked me some questions regarding the stock market, and apart of discussion he didn’t know the difference between Demat and trading account he argued with me the both accounts are same and I explained clearly about the distinction between Demat and trading  mean and I decided to write an article about Demat and trading account most of the market participant doesn’t know the difference.

Most of the people who interested to enter in stock market its necessary to have both accounts in India, many of them don’t know, my uncle considers both accounts are same, but in reality, both are the difference from one another and different purpose.

Difference between Demat and trading account

Trading account

In a simple way if we purchase a jewellery, goods, furniture etc. Is called trade, and we bought anything from shopkeeper is called trade actually we trade with him, so like that in stock market trading is concern with shares.

• Trading account is only for buying and selling of share,
• and it is medium to both buying and selling in the market,
• In market just we buying and selling of shares,
• Without the trading account, we can’t buy and sell a share.

Demat account

I said above the purpose of trading account is buy and sell a share and if we have to hold the share up to one day or after one year, demat account is required, Basically demat account is for holding the shares into long term and short term, if you buy a 100 shares in stock market (any company) you want to hold it after one day you need a demat account.

• Demat account means the Dematerialized account,
• Which is holds the shares in electronic document form
• Demat is similar to a bank account to keep the shares,
• It is used only for storing the shares.

Example for understanding purpose

Let assume you wish to buy 10 shares of reliance industry here the step sand process followed will be as follows

1. You wish to buy the reliance industry shares, first, you have a required money in your saving account,
2. Transfer the money from saving account to trading account.
3. Buy the stocks of that company using a trading account, and place an order to buy those stocks using a trading account, market identifies the seller and matches the order then money will be transferred to seller trading account and credited the shares into your demat account.

Now lets you assume after few days you want to sell the half of the stocks ( 5 stocks of reliance industry) let's follow the procedure will be followed:

1. First, you place a sell order in the market using a trading account
2. And the market find the buyer and matched both orders of buyer and seller
3. If the buyer is found, then the shares in your demat account will be debited from your demat account.
4. The money will be credited to your trading account, the shares will be deducted.

The trading account provides a platform to buy and sell the shares and demat account provide storage of shares, trading account is a medium to saving and demat account, apart of share you can also store the bonds and mutual funds into the demat account.

Before 1990’s there is no demat account the shares will be in paper and document form only, after booming of the internet the shares is storing in electronic form.

• If you open the trading account it will take time 5min to 3 days to open a trading account according to the broker
• If you open the demat account it will take 7 to 10 days time
• There is no maintenance charge to the trading account, only we have to pay demat account annual maintenance charge is rs300 to 1000rs based on the broker
• And have an additional brokerage charge will be applicable to buy and sell the shares.

That’s it.. it's over I hope you all understand the difference between trading and demat account….Happy learning