What is the difference between a demat account and a trading account?

It is the short form of depository beneficiary account, it is used to hold the securities in the dematerialized form.

This kind of account does nothing but acts as a repository where all the entities bought from Stock Market India are kept in the electronic format.

Securities like bonds, debentures, equity shares, preference shares or any securities having ISIN can be held in a Demat Account. Securities having ISIN can be held in Demat Account even when they are not listed on any Stock Exchange. Client opting for equity segment (cash market) in Trading Account are mandatorily need to have a Demat Account.

The Demat Account has to be opened with Depository Participant (DP) of either CDSL or NSDL.

TRADING ACCOUNT

In stock trading, the term trading account refers to an account through which an investor can buy and sell securities. The trading account acts as a connector between you, your bank account, your demat account, and the stock market. This is used solely for the purpose of trading.

Trading Account can be opened only by a stockbroker and can be used for both trading as well as investment . The shares purchased through Trading Account are held in Demat Account and shares sold through trading account are transferred from Demat Account to the Stock Exchange through Stockbroker.

The following points describe the basic difference between the trading account and demat account in

Demat Account- Used to store actual and other securities you buy in the market.

Demat Account- Any stockbroker who is also a DP can open a demat account

Trading Account- It is used for placing buy or sell order.

Trading Account- There is no mandatory charge for the trading account.

Originally published at https://www.myfindoc.com.