With the advent of online trading accounts and accessibility to the financial markets, more Indians are flocking to the world of trading than ever. There was a time when to conduct a trade, people had to physically go to a counter to place orders. However, with trading adopting the electronic system, all a trader needs to get started is a trading account.
But the process of trading also requires an account to hold securities a person trades in. For this reason a demat account is essential for every trader. Here is how you can get start trading with a demat account:
Why do I need a demat account?
In order to understand why demat accounts are essential to trading, let us review some of its most important features:
- Before trading turned electronic, traders had to be burdened with loads of physical, paper stock certificates to conduct trade. This problem has been solved due to the demat account first introduced in India in 1996.
- Demat stands for dematerialisation account. Through a demat account, a trader is able to hold his securities in dematerialised or electronic format.
- Holding one’s securities in a demat account not only keeps them safe but also makes them more accessible than dealing with paper certificates.
- In this regard, demat account closely resemble bank accounts. Similar to storing your money in a bank electronically, your securities are stored in your demat account. You can also debit and credit your securities, or even a zero balance in your demat account.
How to Trade With a Demat Account
Now that we have understood the importance of a demat account, let us look at the steps required to open and start trading with a demat account.
- First, you must find a Depository Participant or DP with whom you can open a demat account. It is always recommended to open a demat account with a reputable company that can offer premium services at a simplified pricing. A good option is to open a free, technology-enabled free demat account with Angel One, who also offer detailed research and guidance.
- Then, you should make sure to link your trading account with your demat account. While they can be in separate companies, it is best to keep them both in the same company to encourage seamless trading.
- To start trading, place an order through your trading account. Your broker will then connect you to the relevant exchange.
- The order is then processed at the exchange. They will check various details about the order and the related transaction, including relevant details of your demat account.
- As soon as the order is processed, the shares or securities will be credited to or debited from your demat account. Trading with a demat account is as simple as that.
Benefits of Trading with a Demat Account
Trading with a demat account makes the entire trading process extremely efficient and convenient. However, apart from the obvious advantage, there are various other benefits of trading with a demat account.
With demat accounts, trading has moved on from being a tedious process. Since your securities are stored in one place, and stored electronically, you can easily access them and their related details from anywhere at any time.
Share Transfers made easy
Demat accounts also make it far easier to facilitate the transfer of shares and securities. While earlier it used to take weeks to settle a trade, demat accounts have made it far more swift.
Physical stock certificates used to come with their own share of additional charges. These included stampy duty, handling charges and other costs involved in transferring securities. With the adoption of demat accounts, trading has gotten rid of these costs, making it far more cost-effective.
One of the best features about holding securities in a demat account is that they can help you avail a loan. Your securities can be used as collateral and you can secure a loan with them.
While physical certificates were the norm of trading before, demat accounts have reduced the cumbersome burden of holding securities for traders. They are indispensable for the process of trading today. Once you open a demat account and link it with your trading account, trading becomes more accessible than ever.
Opening a free demat account with Angel One can provide you with a variety of benefits to help you get started on your trading venture. They offer a technology-enabled DEMAT and trading account as well as technical and fundamental research guidance for your trading decisions.