A Guide To Demat Account And Trading For A Beginners

You are probably familiar with the idea of investing in the stock market. It can offer you significant returns based on market conditions. The first thing you need to make stock investments is a demat account. You may have frequently seen the term Demat Account and may wonder about it. Let us try to solve common queries like what is demat account and trading account and their benefits.

What is a Demat Account?

A demat account is required for every investor except future and options traders to store their financial securities in the stock market. A demat account is a concerned account for long-term or delivery-based traders. You can open a demat account with a stockbroker. There are a few nominal charges for demat account services.

How do investors benefit from a Demat Account?

A demat account serves many purposes in the stock market and offers numerous benefits for investors. A few of these are listed below:

  1. Hold your financial securities in an electronic medium securely.
  2. Track your financial securities online in one place effortlessly.
  3. The account has reduced the transaction charges. There is no stamp duty.
  4. It ensures quick transfer of shares and securities and speed for trade settlement.
  5. There is convenience during electronic settlements.
  6. There is no risk of damage, theft, or fraud associated with the paper-based certificates.
  7. You can sell any number of securities according to your convenience. You can even sell one share.
  8. Automatic credit of corporate benefits.
  9. A loan against securities facility is available.

What is a Trading Account?

A trading account is used to buy and sell securities in stock markets. You can use the broker’s trading platform by opening your trading account with it. You cannot trade directly on stock exchanges. Select a stockbroker registered with the SEBI. It charges brokerage to provide trading services. It is a hassle-free account to trade securities online.

Benefits of Trading Account for Traders

  • Earlier, when the stock market had not digitised, the trading job was performed by the “jobbers,” taking orders from investors and forwarding them to the brokers. Since the stock market has digitised, investors with a trading account do not have to be present with the broker or at the stock exchange to place an order to buy/sell a stock.
  • A trading account allows for finding multiple and leading exchanges on one platform. It is one-point access for BSE, NSE, MCX, and other stock exchanges.
  • You can access reliable information through research reports offered by experts and professionals. These reports will help you to choose the right stocks to make investments in.
  • Day traders need to trade frequently that require hi-tech trading platforms. Leading brokers provide advanced trading platforms to make the trading procedure seamless. With the help of advanced technology, day traders can find a favourable position and place trades quickly.

These are the points to understand the demat account vs trading account.

How to Trade – Beginner Guide

Stock trading is considered risky. You need to strategise your trades to manage the risk. Among the major factors of losing capital is the ignorance to analyse their trading performance. The following approaches will help you to be successful in stock trading:

  • Strategies

Traders need to be disciplined. It is possible with a trading strategy. A strategy helps you make prudent buying/selling decisions. You can not follow your emotions to make trading decisions. Make sure you take a strategically disciplined position to avoid losses.

  • Avoid emotion-based overtrading

The stock market is full of profit potential for patient investors. Most traders, when going through losses in the stock market, may tempt them to trade more to recover the losses, but it is not the right step in regards to trading. You may place trades without performing the required research on the stocks. It can result in more losses.

  • Focus on Risk Rather than Returns

It would be best to manage the risks first rather than focusing on expected returns. You should know the risk involved in trade and your capacity to tolerate risk. You should know the primary objective in stock trading is to save the invested capital rather than make profits while involved in stock trading.

  • Analyse Your Trades

Traders need to analyse their trades and find out trading mistakes that led to losses. Know your mistakes that convert your trade into losses.

Thus, open your demat account and trading account through e-KYC. You need to enter your personal details and upload the required documents to be verified by your DP. Required documents are:

  • PAN card
  • Residence proof
  • Income proof
  • Passport size Photo
  • e-Sign
  • Bank details

You can consider demat and trading accounts with a discount brokerage firm to make stock trading more affordable. Leading brokers may offer free demat accounts and trading accounts. Also, you can save demat charges applied to credit transactions in your demat account. They can waive off account maintenance charges (AMC) for the first two years of opening a demat account.

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