Everyone knows that trading in the share market requires a Demat account that stores the shares in electronic format. The primary purpose of the Demat account is to facilitate ease and convenience in the trading process and make things simpler for the trader. All the share market traders are making Demat accounts, but have you ever thought why can’t you make a trading account instead?

The significant difference between trading and Demat account is that the latter is used to store your securities and shares electronically, whereas the former is made to buy and sell securities in the market. Though Demat and trading accounts have different purposes, they are closely related in some ways. The stock market creates an interdependent link between your Demat, trading and bank account. Another imperative thing to understand here is that trading and Demat accounts together are called 2-in-1 accounts, which is considered as the best Demat account in the stock market.

Difference Between Trading And Demat Accounts

One of the significant differences between both the accounts is that trading account facilitates capital market transactions over a period of time, Demat account, on the other hand, holds the shares at a point of time. Trading account has the nature of flow of transactions, and Demat just captures the holding at a point of time.

When you look at trading vs Demat accounts, you need to consider the measuring time. As the trading account facilitates transactions over a period of time, it will be measured in months or years. Demat account holds the ownership of the securities, so it will be measured at a single point in time, such as a specific date.

How Demat And Trading Come Together While Buying Shares?

As mentioned earlier, trading and Demat might be different from their nature, but they are closely related when it comes to buying and selling of shares. Let’s take an example to understand the situation- better:

You buy 100 shares of ABC company @ INR 800; your order is confirmed. You will have to pre-fund the trading account to INR 80,000 by the next morning. After which, your shares will be credited automatically to your Demat account in T+2 days. Without pre-funding the trading account, you won’t be able to credit your Demat account with the shares. Hence, both are closely related when you buy shares in the market.

How Trading and Demat Interact When You Sell Shares?

Just like when you buy shares, trading and Demat interacts during the time of sale. Let’s take an example to understand this better.

You decide to sell 500 shares of Stock ABC @INR 400. The trading engine will ensure that your Demat account has an adequate balance. Once you have the required balance, 500 shares will be debited from your Demat account, and the amount INR 2,00,000 will be credited to your bank account in T+2 days.

Both trading and Demat accounts are equally crucial in share market trading. You cannot ignore one and prioritize the other. Both are meant to enhance your trading experience and make things seamless and hassle-free for you.

By Chakraborty

Dr Chakrabarty is the Chief Innovation Officer of IntuiComp TeraScience. Earlier she was Assistant Professor of Delhi University, a QS ranked university in India. Before that she has held research positions in IIT Mumbai, IIT Chennai and IISc Bangalore. She holds 2 patents and over 20 research publications in her name which are highly cited. Her area of research is in smart technologies, integrated devices and communications. She also has a penchant for blogging and is an editor of Business Fundas.