Lets Understanding Demat Account And Trading Account

2 mn read

What is a Demat Account?

An account that allows the user to hold their shares in an electronic form is called a Demat account. The physical shares can be converted into electronic form in a Demat account which is called dematerializing the shares. When a user opens a Demat account, a Demat account number is provided to them which helps them in settling the trades electronically.  A Demat account works in the same manner as that of a bank account, where money is deposited and withdrawn. Opening a Demat account does not require having shares, it can also be opened with zero balance. Assistance regarding a Demat account can be provided by a Stock Advisory Company.


Role of a Demat account- 

A Demat account works only as a repository. It is helpful in taking the delivery of the shares when dealing with an equity share. It is also helpful when applying for an IPO and getting the allotment of the shares from it. A Demat account does not help in transactions in the stock exchange.

Nature of Demat account- 

A Demat account only shows the securities and shares held in the account at present. One can learn about the nature of a Demat account by joining stock market courses online.

The functionality of a Demat account- 

Keeping the shares in physical format is a hectic job these days. A Demat account allows the user to store all kinds of shares in electronic format in a digital space. It also allows the transfer of the shares digitally.


What is a Trading Account?

In order to conduct activities related to stock trading, a trading account is needed. This is done because when a company lists its share in the market for trade purposes, it can only be purchased on an electronic system with a special account called a trading account. A trading account can be opened by registering with a stock advisory company or a stockbroker. Once a trading account is opened, a unique trading ID is granted to the applicant which can be accessed for conducting any kind of trading transactions.


Role of a Trading account- 

A trading account is linked with the bank account of the user. Money from the bank account can be added to the trading account and from the trading account to the bank account. Trading in shares and the stock market can only be done if the user holds a trading account.

Nature of Trading account- 

A trading account shows all transactions of the shares from past till present date. Getting Stock market courses online allow a user to learn the exact nature of a trading account.

The functionality of a Trading account- 

A trading account allows the user to purchase and sell the shares as and when needed. One does not have to be physically present in any kind of queue for doing so.


Being an investor one must know all the basics and important features of a share market. Learning is always easy as these days variety of options are available for online classes. A stock advisory company also helps the users in opening a Demat account or a trading account.

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