You know that Demat account only helps you to contain the information of all the shares and equities that you currently have or you have currently bought. So there is not much of operating is done on the Demat account.
If you are new to the share market then it is very important for you to understand the relationship between the Demat account and a trading account. This article from Zoid Research gurukul will help you to understand the basic difference between the Trading and demat account So that you can easily learn about the Basics of Trading account.
Following are the points which explain the main difference between the Trading account and a Demat account
- To put it in simple terms Trading account acts as an interface between your bank account and your Demat account. Whenever you are buying some shares, you need to transfer the money from your bank account to your trading account.
- So Trading account acts as an intermediator between the bank account and the Demat account. The shares that you have bought will be stored into your Demat account.
- Whenever you are selling, the trading account takes the respective shares from your Demat account. Sells them and gets the money.
- If you want that money transferred to your bank account then you need to put a request online to your broker to transfer it to your bank account. It takes around two to three working days for money transfer to completely happen.
- Just like there is no restriction in opening multiple demat accounts for one person, That case is similar to the Trading account, Any person can open number of trading accounts on their name
SELECTING TRADING AND DEMAT ACCOUNTS
You need to understand the following key criteria to select these accounts.
-The purpose or the usage. It means that how many times are you going to buy or sell your shares what is going to be the frequency of it. Is it going to be an Intraday trading or delivery based trading? It is advisable that you chose the broker who charges you the lowest according to your transaction style
-You need to look at it as a complete product, not as a single or individual product like a Demat account. The money in your bank account will be linked to your Trading account for buying/selling of stocks. You need to consider all the things for example if you have a savings account in the certain bank and the broker you have chosen does not provide the transfer to that bank then you may be forced to open the account in the new bank. Most of the times the brokers have tied up with the popular banks for savings and demat accounts
-You need to think in terms of longer duration. If you have an existing Demat account and you want to transfer the shares in that account to another Demat account you need to have complete information regarding the charges that may involve while you are transferring. so make sure that you ask your broker about those charges as those charges are hardly mentioned anywhere
-You need to get the access to best technology, As most of the brokers provide you with a flawless technology using which you can easily access your accounts and buy/sell shares. But not every broker offers that so make sure that you are satisfied with the technology that you are going to use.
-With the increasing demands, it is very common to get some errors in the system from time to time, hopefully, it never happens to you but in case it happens you need to have a proper and a nice service which will help you to resolve that issue immediately. Also, make sure what types of personal services that you are going to get because mostly every investor is assigned to a specific broker to contact at any time
Trading account is what makes the transactions happen, It acts as a basic interface between your bank account and your Demat account. So make sure you consider all the factors mentioned above for your trading account.