Trading Account Vs Demat Account

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Trading Account Vs Demat Account
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A trading account helps you trade shares within
minutes, even seconds. A trader can transact
multiple times in a single trading session
depending on the market that day using a trading
account. A trading account is used to trade
stocks and shares while a Demat account is used
to hold or store the stocks and shares that are
bought and sold. To be able to trade in shares
and equities, you must have a trading as well as
a Demat account. What is a trading account? A
trading account lets you trade in shares and
stocks within a short as well as a long-range of
time. You can indulge in intraday trading as well
as inter-day trading using your trading account.
These accounts are registered with a brokerage
firm and are assigned a unique ID which is used
to perform transactions from this account. A
trading account can be used to trade in
non-delivery transactions. If you intend to
trade in options and futures in share indices, a
trading account is sufficient. These
transactions do not create ownership and the
profits and losses can be directed credited to
and debited from a trading account. Similarly,
you can trade in currencies solely with a
trading account. But according to SEBI
regulations, you cannot hold stocks or equities
that create ownership in your trading account
and any trade in equities requires you to hold a
Demat account. What is a Demat account? A Demat
account is used to hold or store shares and
equities that are bought or sold. You can only
hold assets owned by you in your Demat account
and hence, futures and options that create no
ownership and are contract-based can only be
traded and stored in a trading account. But,
while a trading account can be used to produce a
non-delivery transaction where you buy and sell
within a single day and hence the net delivery
remains zero, to trade in equities you have to
necessarily hold a Demat account. A Demat account
allows you to hold equities and stocks that
create ownership and these may be traded using a
trading account. To be able to do this, both
these accounts should be linked to each other.
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What is the difference? A Demat account serves
as a wallet or a bank that you use to store your
assets and a trading account is a medium to
access that wallet to perform a transaction. You
may hold just a trading account if you intend to
trade just in futures and options. All the FO
transactions are credited or debited in cash and
do not create ownership. Hence there is no need
to create a Demat account. On the other hand, if
you are planning to trade in stocks and equities,
you need to open a Demat account. The same is
true of any other transactions that may create
ownership. A Demat account may incur annual
maintenance charges. A trading account doesnt
incur any such charges and is easier to maintain.
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