Best Demat Account in India Demat and Trading Account (Requirements for Investment in Share Market/Stock Exchange)
Two types of accounts are required for investment in Stock Market. One account is called DEMAT account and the other account is called TRADING account. To know why it was needed, we have to understand the functioning of the Stock Exchange before the advent of Digital age of Internet. Before the advent of the Digital age of the Internet, the Cash Transaction was done for Purchase and Sell of Shares and for this, the investors or brokers need to visit physically at Stock Exchange. The purchase of shares was received in the form of a document called Share Certificates. These Share Certificates were to be sold on the Stock Exchange as Shares. In this way Investors did their business in the Stock Exchange long ago.
The advent of Internet technology and the Digital age saw unprecedented Changes in Investment and Functioning of the Share Market/Stock Exchange. Documents of Share Certificates have been replaced by DEMAT Account (Full Form of DEMAT Account is Dematerialized Account, the term itself is SELF EXPLANATORY) and TRADING Account is used for buying and selling Shares in Digital mode rather than using cash.
What is Demat Account and Trading Account and why is it required?
When we go to the market for shopping, we have a BAG and a WALLET of Cash. On purchasing items, we pay cash to the shopkeeper from the WALLET. After that we put the Items in our BAG. Now there are some terms to understand described are as follows:
- BAG – It is like a DEMAT account on which the purchased items are kept in it.
- WALLET – It is like a TRADING account from where the cash has been taken out for purchase of items.
- SHOPKEEPER – The role of Shopkeeper is like a STOCK EXCHANGE from where exchange of goods and cash are done.
The Sell and Purchase of shares requires a best Demat account in India and it is linked to a Bank account so that requirement of funds to buy Shares, can be made available by transferring it from the Bank account . The fund transferred from a Bank account to a TRADING account is used to purchase Shares. The account which is used to keep the purchased Shares on it is called DEMAT account. DEMAT and TRADING accounts exist in Digital mode and do not require any documents to be used. In this Digital age of Internet, Investors can trade in the Stock Market through Laptops, Computers and Smartphone by opening DEMAT and TRADING, at the comfort of their chair at home.
Best Demat Account in India – What is T + 2 Days?
The Investors has to play the role of Buyer and Seller for their business transaction in the Stock Market. When Buyer purchases Shares, the amount gets withdrawn from their TRADING Account and gets credited to Seller’s TRADING Account. This process takes T + 2 days to complete. T represent the day when shares are purchased and +2 represent the maximum time period of two days of withdrawal of funds from the TRADING account of Buyer which gets transferred or credited to Seller’s TRADING account. That is why the entire duration of this process is described as T + 2 Days.
When Sellers sells Shares, the amount gets transferred and credited to their TRADING Account from the TRADING Account of Buyers. This process takes T + 2 days to complete. T represent the day the when Seller sells the Shares. +2 represent the maximum time of two days of credit of amount to TRADING account of the Seller from the TRADING account of the Buyer. That is why the entire duration of this process is described as T + 2 Days.
Can trading be done without opening a Demat Account?
Trading can also be done without opening a DEMAT account but investors do not get much profit from it. Only Intraday Trading is allowed without opening a Demat account. Intraday Trading means the Purchase and Sell of Shares must be done on same day. If their price of Shares falls after its purchase and due to non-availability of DEMAT account and there will be compulsion to sell the Shares on the same day. As such, the business transaction will be in LOSS.
Patience is needed to earn profits in the Stock Market. Adoption of any steps in excitement or hurry can also be risky. That is why opening a DEMAT and TRADING account and initial trading in low investment will pave the way for profit.
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