For those of you who want to invest in stock markets, there are few basics that you have to be aware of. Two of the most important requirements for trading in a stock market involves, a Demat Account and a Trading Account.
1. What is a Demat Account?
Demat is simply an account that allows you to hold your shares in an electronic format. A demat account converts the physical shares into an electronic form, therefore dematerializing it. On opening a demat account, you will be given a demat account number to be able to electronically settle your trades. The workings of a demat account is very similar to that of a bank account where you keep your money with the option to deposit and withdraw. In your demat account too, the securities are held and accordingly debited and credited. You do not need to have any shares to open a demat account; In fact, you can even have zero balance in your account.
2. What is a Trading Account?
To conduct your stock trading activities you require a trading account. This is because when a company lists its shares in the stock market you can trade the same on an electronic system through a special account known as a trading account. You can get such an account by registering with a firm or a stock broker. With this account you are assigned a unique trading ID which grants you access to conduct trading transactions.
3. What is the difeerence between Demat Account and Trading Account?
The demat account is used as a bank where shares bought are deposited in, and where shares sold are taken from. A trading account is used to place buy or sell orders in the stock market.
Imagine you want to buy a carton of milk from a dairy store.You pick the carton of milk and go to the billing counter. Here, you remove a specific sum of money from your wallet to pay the cashier.
In this example, the money stored in your wallet is similar to stocks stored in your demat account. Removing money from your wallet to pay the cashier is like trading. For this transaction to occur, you need to have a trading account.
As an investor, you need a demat account to deposit and hold your stocks when you purchase them. Think of your demat account as a savings bank account for your shares. You can deposit and remove stocks from your demat account whenever you like; just as you deposit and withdraw money from your bank account as per your convenience.
In comparison, you need a trading account to place ‘buy’ and ‘sell’ orders in the market. It is a requisite to conduct any transactions in the stock market. You can register with any online stock broking firm to create an online trading account. When you register, you are provided with a unique ID that allows you to trade in the market.
4. How to open a Demat Account ?
You can open a Demat Account following these simple steps:
Step 1: Get in touch with an agent of depository or a depository participant to fill the form required for opening a demat account. You may access the list of depository participants (DP) on websites of depositories like the Central Depository Services (India) Ltd and National Securities Depository Ltd .
Step 2: Fill the account opening form with copies and documents of ID and address proof.
Step 3: Sign an agreement with the DP that outlines the details of your rights and duties as an investor and DP. Remember that you have the right to receive a copy of the agreement and the schedule of related charges for your reference.
Step 4: The DP will open your account and give you a demat account number, also known as Beneficial Owner Identification Number.
5. How to open a Trading Account?
Opening a Trading Account is made simple in the form of the following process:
Step 1: Begin with selecting a Broker or a firm .
Step 2: Make sure to make a comparative study of the brokerage rates and the services included .
Step 3: Contact the shortlisted broker for opening your account.
Step 4: Fill an account opening form that also requires you to provide KYC details. Along with your ID and address proof submit these.
Step 5: Undergo an application verification process.
Step 6: Get the details of your trading account.
Step 7: Start Trading.
While opening a demat and a trading account have been made simple, as an investor you still require to approach the stock markets with a good understanding of the markets and the instruments traded therein. Investing in stocks is subject to market risk and must be accompanied with expert counsel. To know more about how to invest and how to identify the best stock, visit ClearTax where we have a sampled offering of hand-picked stocks that meet every risk profile and financial goals.
Established in 2009, Tradebulls Securities Private Limited is a reputed financial firm offering world class brokerage services and wealth management to retail clients. These include Equity, Currency and Commodity Trading. We also provide distribution of Mutual Funds, IPOs, Personal Loans and Insurance, as well as Portfolio Management, Online Trading and Depository services. Our research and advisory arm releases high-quality fundamental and technical research reports at regular intervals. Tradebulls is a company with 1000+ employees. Tradebulls is also among the top five brokers in Gujarat on NCDEX and BSE in terms of turnover.
Currently Tradebulls is based in 9 cities i.e. Ahmedabad, Bengaluru, Delhi, Gandhinagar, Hyderabad, Mumbai, Rajkot, Surat and Vadodara with 18 branches.
We continue to focus on what we do best
• delivering powerful, easy-to-use trading technology
• supporting active traders over a wide range of products
• teaching the world a smarter way to seek risk management and spot potential opportunities
Why Tradebulls ?
• We are a blend of Traditional and Corporate Broking firm with a Local Presence and Global Vision
• 100% Retail-centric focus and total commitment towards Customers / Business Partners
• One-stop shop for all the financial requirements in broking and wealth management
• Personalized Services
• Dedicated Relationship Manager / Advisor to service all your trade requirements
• One of the highest success ratios in both technical and fundamentals calls