What is the Difference between Demat Account and Trading Account? - Investallign

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What is the Difference between Demat Account and
Trading Account?
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The Difference between Demat Account and Trading
Account

• Those who have been trading in shares remember
  the days of physical trading before mid-90s.
  Later, the stock exchanges started using the
  electronic system which eliminated the need of
  going to the counter and placing the order
  physically.
• The availability of the internet connectivity
  changed the situation further. Now, share trading
  is a matter of a few clicks. One can do it
  sitting in front of a computer.
• When you deal into shares, two terms are used
  quite frequently demat account and trading
  account. Still, some people think that these are
  not two separate entities.
• The blog explains the difference between a
  trading account and demat account.

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Demat Account Trading Account
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Trading Account

• It is the online window used for placing orders
  to purchase or sell shares in the stock market.
  A stock broker opens a trading account for their
  customers. It helps in trading seamlessly and
  quickly.
• The process of opening a trading account is quite
  simple. The broker who opens the trading account
  is a registered member of the stock exchange.
• It has several clients like you. Hence, every
  client gets a unique identification number. By
  using the client-id, you can log on to the
  trading portal.
• You can give selling or buying instructions
  verbally by calling the broker or do it yourself
  by using the trading account.

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Demat Account

• A demat account is a short form of dematerialized
  account. It holds the shares and securities of an
  institution or individual investor. It holds the
  information in the electronic form.
• When you do trading, which means you sell or buy
  shares, the transactions happen through the demat
  account. Like the bank account holds your money,
  the Demat account holds your shares.

What is the difference between the two?

• Many people are unable to make out the
  difference between a demat account and a trading
  account. However, it is quite simple.
• A trading account is just a virtual trading
  platform where you can buy or sell shares. The
  shares are stored in the Demat account which is
  linked to any of the authorized depositaries.

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• In India CDSL and NDSL are two depositaries
  approved by SEBI. Every investor is supposed to
  be linked with them through a Demat account.
• When the delivery trading happens, the Demat
  account is updated at the end of the trading
  session. Thus, at any moment, the Demat account
  reflects the end of the day position of last
  trading day.
• The trading account belongs to the broker who
  issues it for their client. For every transaction
  of selling or purchasing shares, the broker
  charges a certain percentage of transaction value
  as brokerage.
• The brokerage is deducted from the balance
  amount. If the amount goes in the negative, then
  the client has to deposit further amount.
• Both Demat and trading accounts need supporting
  documents to verify the validity of the client.
  PAN card, address proof and identification proof,
  bank account details and canceled cheque are the
  required documents.
• The list of supporting document may vary on a
  case to case basis.
• Also Read
• How to buy Shares using Demat Account?
• How to Open Demat Account in Zerodha Online?

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