• Facebook
  • Twitter
  • Instagram
  • RSS
  • FinGrad
  • Market News
  • Alerts
  • Company Results
  • IPO News
  • Commodity
  • Corporate Actions
  • Economy
  • Portal
  • Screener
  • Youtube
  • Forum
  • *We’re Hiring!
0 Items
Trade Brains
  • Articles
  • News
  • IPO
  • Demat Account
    • Compare Stock Brokers
  • FinGrad
  • Resources
    • Podcast
    • Quizzes
    • Intrinsic Value Calculators
    • SIP Calculator
    • Best Quotes
    • Books
      • Dividend Investing
      • Value Investing
      • Investing Mindset
      • Book Reviews
      • FREE Guide
    • Videos
Select Page

Demat vs Trading Account – What’s the difference?

by Kritesh Abhishek | Mar 27, 2020 | Investment Basics, Online Brokers | 8 comments

Demat vs Trading Account - Whats the difference cover

Hi Investors & Traders! Today, I am writing this post regarding the demat vs trading account because of the popular demand by our readers. Many of the readers of ‘Trade Brains’ asked me to cover this topic as they are constantly confused about what is a demat and trading account and their difference.

Therefore in this post, I am going to explain what is the difference between the demat and trading accounts in a very simplest possible words.

Most of the newbies who enter the stock market might already know that they’ll need a demat and trading account to start trading/investing in India. However, the majority of beginners do not know the difference and consider both the demat account and trading account to be the same. But in reality, both these accounts are entirely different and serve different purposes.

Table of Contents

  • Difference between demat and trading account
    • — Trading Account
    • — Demat Account
  • Example of Demat and Trading Accounts
  • Quick Fact About Demat Account
  • A few other points to know about demat and trading account
  • Summary

Difference between demat and trading account

— Trading Account

A trading account is a medium to buy and sell shares in a stock market. In simple words, it is used to place buy or sell order for a stock in the exchange.

Different stockbrokers offer different trading tools to their clients to simplify their trades. For example, Zerodha, the biggest stockbroker in India offers ‘KITE’ as their platform to trade in stocks. Once you have opened your trading account with a stockbroker, you can place your buy/sell orders using those platforms.

Angel broking free demat account

zerodha kite dashboard(Image: Kite Trading Platform by Zerodha)

— Demat Account

Demat account is the short form for ‘Dematerialised account’. It is similar to a bank account. Just as money is kept in your savings account, similarly your bought stocks are kept in your demat account.

In other words, a demat account serves as a facility where stocks that you buy are deposited and the stocks sold are taken away. Demat account is used only for the storage of stocks, not for transactions (buying/selling).

Example of Demat and Trading Accounts

Let us understand the difference between trading and demat account further with the help of an example. Assume that you wish to buy 100 stocks of Maruti Suzuki. Here, the sequence followed during the procedure will be as follows:

  1. First of all, you’ll need to have a savings equal to or greater than the buying amount in your savings account.
  2. Next, you’ll transfer the money from saving account to trading account.
  3. Now, you’ll buy stocks of ‘Maruti Suzuki’ from the stock exchange by using your trading account and paying the amount.
  4. Finally, the money is transferred to the seller through your trading account and stocks of ‘Maruti Suzuki’ will be transferred to your demat account.

Now let us assume that after a few months, you wish to sell 20 stocks of ‘Maruti Suzuki’ from your holdings of 100 stocks. Here, the sequence followed will be as follows:

  1. First, you’ll place a sell order in the market using your trading account to find a buyer.
  2. If a buyer is found, then the shares will move from your demat account to the buyer.
  3. Finally, the money gained by selling your stocks will flow through your trading account to your linked savings account.

Also read: 8 Best Discount Brokers in India – Stockbrokers List 2020

Difference Between Demat and Trading Account

Quick Fact About Demat Account

Before the internet became popular in India, there were no demat accounts. Share certificates were provided whenever you buy stocks (on papers). However, there were many limitations to using paper share certificates. They used to get torn, stolen, faced safety-related issues or the ink just gets fade away with time.

Nevertheless, after coming of the internet from the mid-1990s, the stocks started getting kept in the electronic dematerialized form in the demat account of the buyers. It resolved most of the limitations of the old paper share certificates.

Also read: Where to open your Demat & Trading account? – A Beginner’s Guide

A few other points to know about demat and trading account

  1. Demat and trading accounts are opened together (also known as 2-in-1 account) with most of the popular stockbrokers in India. For example, Zerodha, Angel Broking, 5 Paisa, etc.
  2. A few big stockbrokers (generally bank brokers) also offer a 3-in-1 account i.e. Saving+Demat+Trading account to their clients. For example ICICI Direct, HDFC Securities, etc.
  3. In general, there are no annual maintenance charges for a trading account, where for the demat account this maintenance charge may vary from broker to broker. It is typically around Rs 300-400 per year.
  4. These days, the investors and traders can open instant (paperless) demat and trading account within 10 minutes with major stockbrokers. Nonetheless, the facility of offline account opening is still popular in India and offered by all these brokers.
  5. The account opening charge for demat and trading account also varies from broker to broker. A few brokers offer free account opening. However, the majority of them will charge somewhere between Rs 300-500 to open your brokerage account.
  6. In addition, you are also allowed to open multiple demat and trading accounts using same PAN card. For instance, You can have multiple accounts- one in ICICI direct and other in Zerodha.
  7. Finally, choose your broker wisely to open your demat and trading account if you want to avoid unnecessary charges and risks.

Also read: How to Open a Demat and Trading Account at Zerodha – No 1 Stockbroker in India?

Summary

Let us quickly summarize what we discussed in this article regarding trading and demat account in India.

A trading account provides a platform to buy or sell the share in the market. It acts as an intermediary between your saving accounts and demat accounts. In simple words, it takes share from your demat account and sells them in the market.

On the other hand, it takes money from your savings account and buys a share to keep in a demat account. Further, a demat account is a facility to keep your shares in an electronic dematerialized form.

That’s all. I hope this post on the difference between demat and trading account is useful to the readers. If you have any doubts, comment below. I will be happy to help you out. Happy Investing!

tradebrains portal app download
kritesh-abhishek-tradebrains
Kritesh Abhishek

Kritesh (Tweet here) is the Founder & CEO of Trade Brains & FinGrad. He is an NSE Certified Equity Fundamental Analyst with +7 Years of Experience in Share Market Investing. Kritesh frequently writes about Share Market Investing and IPOs and publishes his personal insights on the market.

  • 5 Tata Group Microcap Companies: Did you know these Less Popular Tata Stocks?
  • Why you never bought a stock? A Few Common Reasons
  • Top Drone Companies in India - Stocks to Watch in 2022
Set your Author Custom HTML Tab Content on your Profile page

  1. satish rudragoudar
    satish rudragoudar on November 8, 2017 at 1:38 pm

    I am applied to open Dmat account in AXIS BANK, they said it will take 15 to 20 days to open an Dmat account,now my question is how to open that trading account

    Reply
    • Kritesh
      Kritesh on November 8, 2017 at 1:42 pm

      The broker will open both demat and trading account for you. You cannot start trading until you have your trading account. Just ask ‘AXIS Bank’ agent about the trading account. I guess, this duration is for opening both the accounts.

      Reply
  2. Sanjay
    Sanjay on May 7, 2019 at 12:32 am

    I have a kotak security demat acc can i use demat acc of kotak for use zaodha trading acc

    Reply
  3. 500PerCrore
    500PerCrore on August 21, 2019 at 2:47 pm

    I like very much Demat Account. I am also use very Secure….

    Reply
  4. 500 per crore
    500 per crore on August 22, 2019 at 12:23 pm

    Always there exists a great contrast between demat and trade and in business terms demat seems to be much beneficial.

    Reply
  5. Zaki
    Zaki on August 24, 2019 at 12:20 pm

    Kritesh, may I know why have you keep two demat accounts, when you can trade from one account at minimum cost??

    Reply
    • Kritesh Abhishek
      Kritesh Abhishek on August 25, 2019 at 12:25 am

      Hi Zaki. I wrote this article two years back when I was using both and also researching the difference. ICICI direct was my first broker and hence, I am a little biased to close the account. However, gradually I’ve shifted all my trades to Zerodha to pay a minimum brokerage. You can find a lot of articles on this blog where I have compared both and concluded my learnings.

      Reply
      • Desai
        Desai on December 16, 2020 at 4:29 pm

        Thank you for the information. i would like to start trading by opening in Zarodha.
        suggest me. also how to buy international shares

        Reply

Submit a Comment Cancel reply

Your email address will not be published. Required fields are marked *

Search Topic or Keyword

Trending Articles

  • HDFC AMC vs Nippon life AMC - Cover imageHDFC AMC vs Nippon life AMC – Profitability, Valuation & Future Prospect
  • Credit Rating Agencies in india - Cover imageTop Credit Rating Agencies In India – Financials & Complete List
  • Blue star vs Voltas limited - Cover imageBlue Star vs Voltas Limited – Financials, Future Prospects & More
  • ETF vs Index Funds - Cover imageETF vs Index Funds – What’s the Difference between the two?
  • Adani Power vs Tata Power - Cover ImageAdani Power Vs Tata Power – Profitability, Future Prospects & More!
  • Motilal Oswal vs Angel One - Cover ImageMotilal Oswal Vs Angel One – Revenue, Profitability & More Details
  • Reliance JIO vs Airtel - Cover ImageReliance JIO vs Airtel – The war of two telecom giants in India!
  • Brigade Enterprises VS Oberoi Realty - Cover imageBrigade Enterprises VS Oberoi Realty – Fundamentals & Future Prospects
  • How big is tata group - cover image5 Tata Group Microcap Companies: Did you know these Less Popular Tata Stocks?
  • Biggest Stock Market Crashes in India - cover image10 Biggest Stock Market Crashes in India




Recent IPO’s

  • Aether Industries IPO Review – Strengths, Weaknesses and More!
  • eMudhra Limited IPO Review 2022 – Strengths, Weaknesses, & More!
  • Paradeep Phosphates IPO Review – Strengths, Weaknesses & Other Details!
  • Ethos Limited IPO Review 2022 – Strengths, Weaknesses, & More!
  • Venus Pipes & Tubes IPO Review – Dates, Price Band, GMP and Other Details!

Easiest Stock Screener Tool!

Best stock discovery tool with +130 filters, built for fundamental analysis. Profitability, Growth, Valuation, Liquidity, and many more filters. Search Stocks Industry-wise, Export Data For Offline Analysis, Customizable Filters.

  • — Stock Screener
  • — Compare Stocks
  • — Stock Buckets
  • — Portfolio Backtesting

Start your stock analysis journey with Trade Brains Portal today. Launch here!

Keep the Learning On!

Subscribe to Youtube to watch our latest stock market videos. Subscribe here.

Angel One – Open FREE Demat Account!

Angel broking free demat account

About Trade Brains

Trade Brains is a Stock market analytics and education service platform in India with a mission to simplify stock market investing.

Phone: [+91] 8088491790
EMail: info@tradebrains.in

To Advertise/Press Releases on this website, please e-mail us at advertise@tradebrains.in

Quick Links

  • Trade Brains Portal
  • Stock Screener
  • Compare Stocks
  • Trade Brains News
  • Fair Value Calculator
  • Fingrad Academy
  • Subscribe on Youtube

Resources

  • How to Start Investing?
  • Value Investing Course
  • Best Stockbrokers List
  • Must-Read stock market books
  • Best stock market apps
  • Must know websites
  • Stock Analysis Guide

Download Our Apps

Trade Brains Portal Google playstore

Trade Brains Portal Appstore

  • About
  • Careers
  • Advertise and Sponsor
  • Terms and Conditions
  • Disclaimer & Privacy Policy
  • Contact
  • Facebook
  • Twitter
  • Instagram
  • RSS
2022 © Dailyraven Technologies Pvt Ltd - All Right Reserved