The Stock market is said to be one of the best options to invest in especially of your goals are to beat inflation. A Stock exchange is a supermarket for stocks, where an institution hosts a market to trade in stocks, bonds, commodities, options, and futures. For a person to trade in these instruments he needs to fulfill some prerequisites such as holding a Demat account as well as Trading account.
What is a Trading account?
When someone desires to buy stocks, then the foremost requirement is to have a trading account. As the name suggest, the basic purpose of this account is to trade in stocks. Stock broking firms have thousands of clients. It is not feasible to take physical orders from each client every time an individual trade account is provided to buy/sell.
What is a Demat account?
Under Depository Act, 1996 by SEBI (Securities Exchange Board of India) who regulates the stock market, decided that shares should no longer be held in physical form for investor’s convenience and trade expediency. Demat account is an account where stocks are held in dematerialised to form, it is like a locker for your valuables.
How does the trading of stocks take place?
Just like you add money to your wallet before you head out to buy something similarly you have to add money in your trading account before you march to buy stocks from the market. The stocks bought from the trading account will be stored as valuables in your Demat account.
For example, you have Rs. 1000 in your bank account. You will transfer Rs. 1000 in your trading account to buy stocks.
Scenario 1:
You buy 10 shares of Rs. 100 each.
Effect on trading account: The trading account is debited of Rs. 1000
Effect onDemat account: 10 shares are added in Demat account.
Scenario 2:
You sell 10 shares at Rs. 150 each.
Effect on trading account: The trading account is debited with Rs. 1500
Effect onDematt account: 10 shares are deducted from the Demat account.
How to open an online Trading account and Demat Account to buy and sell shares?
- Select broker or firm:
Choose the broker you want to open an account with after scrutinizing if it takes timely orders because in stock market, time is money. For example Angel broking satiates with centralized help desk and pan India presence.
- Compare brokerage fees and other services:
Ever broker charges certain fees for processing your buy/sell orders, opening account and annual maintenance. Compare and choose wisely paired with their level of proficiency in processing orders.
For example, Trading with Angel Broking can help you sail seamlessly in the stock market with en-number of services like portfolio management, margin funding, regular research reports, depository services and anytime/anywhere online equity trading other than the customary opening of trading and demat account.
- Get in touch with broker to open Demat account:
Visit an online stock broker’s website & fill basic details like name and number to open your demat account!
Open Online Trading account
Next, a representative will get in touch so that you can fill a few forms and get your KYC verified.
- Get trading account details:
Verification of KYC will be followed with quick delivery of trading account details.
- Buy/sell:
Once the trading details are furnished, you can transact in the stock market!
Note: Angel Broking is chosen just as an example.
Related articles:
- Stock exchange: What is it, Who owns, controls
- Stock Market Index: The Basics
- Why people Lose Money in Stock Market
- News that affect the Stock Market
- Ups and Downs of Sensex
A great blog. Thanks for the share. I have always been keen on trading and have wondered whether it is not possible to trade without the assistance of a broker? Can you throw some light on this query? Online trading has simplified the whole process of trading but still we need a reliable broker, why?
very well explained the overall concept of D-mat accounts. Thanks for sharing this informative article.
A big Salute to you. Your post just motivates me. Thanks a lot for sharing your openion, Highly appreciate it.
I am looking to enter into trading and am trying to understand which stock broker might work the best for me. Read an article somewhere (link attached along). Looking forward to your thoughts.
Ultimately, after spending many hours on the internet at last we have uncovered somebody that surely does know what they are. Thank you for sharing wonderful article. Great post. I will be your regular visitor.
Beautifully explained the inside of how buy and sell happen in stock market. Regarding Kiran sir’s question, yes you are right, trading account will be credited in scenario 2. You can have multiple Demat account. For example, I have with SBI CAPs and Zerodha.
In “Scenario 2”, is trading account debited or credited?
Can I have multiple DMAT accounts with different stock brokers?