The primary distinction between a Trading and a Demat account lies in how they are used for online transactions. On the one hand, a Trading account facilitates the purchase and sale of securities within the stock market, and a Demat account holds securities in electronic form.
Although both these accounts have different functions, they are related to each other. Moreover, your stock market activity is a complex interplay of your Demat, Trading, and bank account. You can enroll in a trading course in Kolkata to learn the basics of Demat and trading account before starting trading in the stock market.
Understanding a Demat Account
It is a service that lets you retain your shares electronically. This means a Demat account transforms physical shares into electronic form, effectively dematerializing them. After starting a Demat account, you get a Demat account number, allowing you to settle your trades digitally. A Demat account is similar to a bank account, as it facilitates you with stock deposit and withdrawal options.
Understanding Trading Account
A trading account is required to perform stock trading operations. This is because when a business lists its shares on the stock exchange, you can trade them on an electronic system using a trading account. Registering with a business or stockbroker can get a trading account. This account provides you with a unique trading ID to conduct trading transactions.
Difference Between Trading and Demat Accounts
The following table demonstrates the primary differences between a Trading and Demat account:
It is used for buying and selling securities by debiting your Demat account and selling them in the market.
It enables investors to store their financial instruments electronically. This also facilitates you to convert physical shares into electronic securities.
The nature of this account is similar to a current bank account. It is linked to both your bank and Demat account. Additionally, it works by withdrawing your shares from the Demat account and selling them in the market.
A Demat account functions like a savings account which holds shares and securities purchased from the market, in contrast to a trading account, which is like a current account.
Steps to Start a Trading Account
Having a trading account is essential to start the transaction of stocks in the market. Therefore, the following procedure explains all the steps of opening a Trading Account:
Step 1: Begin by deciding on a broker or firm.
Step 2: Conduct a comparative analysis of the brokerage costs and services offered.
Step 3: Contact the brokers you’ve shortlisted to open an account
Step 4: Fill out the registration form, which requires identity and address proof for KYC information.
Step 5: Complete the application verification process.
Step 6: Get the information about your trading account.
Step 7: Once you access the trading account, you can start purchasing and selling stocks in the market.
Steps to Open a Demat Account
To open a Demat Account, you need to follow these simple steps:
Step 1: Contact a depository agent or participant and complete the Demat account application form. The DP list is available on depositories’ websites, such as National Securities Depository Ltd and Central Depository Services India Ltd.
Step 2: Complete the account application form by uploading your ID and address proof.
Step 3: Sign a contract with the DP outlining your rights and responsibilities as a DP and investor. Here you must remember to get a copy of the agreement and details of charges relating to your reference.
Step 4: The DP will create your account and provide you with an account number known as a Beneficial Owner Identification Number.
Demat and trading accounts are two essential components for investing or trading in the stock market. Additionally, investing in stocks cannot be conducted digitally without a Demat and Trading account. Therefore, many investors rely on the stock market training academy in Kolkata to learn all the details of stock purchase and sale.
Furthermore, a Demat account ensures the complete security of your purchased stocks, while a trading account facilitates smooth transactions. Even though they are separate accounts with different purposes, investors never follow two separate processes. This is so because technological integration makes the process smooth and seamless for investors.