What is the Difference Between Demat Account vs Trading Account
Difference between demat and trading account
Both demat and trading accounts are necessary to trade
in stocks. However, they are quite different. Here is an example to help you
identify the difference.
Imagine you want to buy a carton of
milk from a dairy store.
You pick the carton of milk and go to the billing counter. Here, you remove a
specific sum of money from your wallet to pay the cashier.
In this example, the money stored in your wallet is similar to stocks stored in
your demat account. Removing money from your wallet to pay the cashier is like
trading. For this transaction to occur, you need to have a trading account.
As an investor, you need a demat
account to deposit and hold your stocks when you purchase them. Think of your
demat account as a savings bank account for your shares. You can deposit and
remove stocks from your demat account whenever you like; just as you deposit
and withdraw money from your bank account as per your convenience.
In comparison, you need a trading
account to place ‘buy’ and ‘sell’ orders in the market. It is a requisite to
conduct any transactions in the stock market. You can register with any online
stockbroking firm to create an online trading account. When you register, you
are provided with a unique ID that allows you to trade in the market.
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