Why Demat and Trading account is essential for Stock Market



If you want to invest in the stock market , you essentially need two accounts - Demat  account and Trading account.

But why Demat and Trading account is essential for Stock Market? to know the proper answer of this question we have to go past in time to understand all this things. Years ago, if anyone wanted to purchase or sell shares, then he or his broker must be physically present at the stock exchange and if you wanted to purchase the shares, then you had to visit the stock exchange with the cash. And if you wanted to sell shares, then also you had to visit the  stock exchange with your physical share certificates. when the same  price of the buyer and seller matches, then only you had to pay the seller in cash, and the seller hand you the physical share certificates. Its was a complicated process.

In this digital age, SEBI change the process of buying and selling by introducing Demat account to make it easy. Now if you want to purchase and sell the share then you can easily do with your mobile devices. The cash you used to carry with you to the exchange now lies in your trading account. And the physical share certificates you used to take with you are no longer needed because all the shares are now stored in digital format in you demat account

Why Demat  account is essential for Stock Market

A Demat account is like your bank account. In bank account you store cash but in demat its store your shares And each share has a unique ISIN code which you can use to verify the share and its number. The short form of the Demat account is  dematerialization account. Dematerialization means storing  the electronic form of physical share certificates . In India, two organizations maintain Demat accounts. NSDL and CDSL. These are called depositories.

Why Trading account is essential for Stock Market

Now let's talk about the trading account. All the transaction of purchasing and selling of shares take place in trading account. If you want to purchase and sell the share then you can do it in a trading account.

But to deposit cash in the trading account, you will need your bank account and the bank must be linked with your trading account. Trading account is like a wallet where the money is stored for buying and selling of shares. So, you can only transact in shares through the trading account.

If you want to know how much money is needed to start investing in stock market?

Let's understand it with a imagination example.

Let's say you have 10,000 in your bank account, and you want to buy 10 shares of a company pricing Rs. 100 each. Then, you'll must have to transfer Rs. 10,000 from your bank to your trading account. Now you can place the order of buying for those 10 shares. At the same time if some one sell 10 shares of that company then the order get executed

Then, Rs. 10,000 is transferred from your trading account to the trading account of the seller. And the shares are transferred from seller's Demat account to your Demat account The execution of this whole cycle takes T+2 days T+2 means trading day plus 2 days. So, if you transacted on Monday, you will have the shares delivered to you on Wednesday evening.

To start investing you need a Demat and trading account with low brokerage fees. you can open your account at Zerodha click here to open your trading account now  

If you really want to make some money in stock market then you must have the proper knowledge of analyzing the share, through fundamental and technical. otherwise it will be time and money waste. To learn all the analysis of the share you can subscribe our youtube channel