How Does Demat Account Work? If you want to invest in the stock market or you essentially need two accounts – Demat and Trading Account. Here we will tell you what a trading and Demat account is. Their advantages, can you use only one trading account, can you only open a Demat account, we will explain the what is Demat account what is the use of it, what is a Demat account and How Does Demat Account Work?. Beginners also search the Demat account How It Works and their use in the share market working of Demat account.
Demat Account Information
a few years ago, if someone wants to buy or sell shares, they or their broker need to be physically present on the stock exchange. So if you wanted to buy shares, you had to go to the exchange with cash and if you wanted to sell the shares you had to go to the exchange with your physical share certificates.
When the quoted price of the buyer and seller matches, you will pay the seller in cash and the seller will hand over the physical share certificate to you. But it was a cumbersome process. SEBI introduced a Demat account to make it easy. So in this digital age, if you want to buy or sell shares, you can do this through your mobile or laptop.
The cash that you use to take with you to the exchange is now in your trading account and the physical share certificate that you use to take with you is no longer needed.
Demat account How It Works?
All those shares are now stored in digital format in your Demat account that is the working of the Demat account. Now let’s talk about the trading accounts. If you want to do any type of transaction in any security, you need an account called a trading account. So if you want to buy or sell shares you can do this through an account known as a trading account.
Like if you want to order 500 shares you do it through your trading account. Or if you want to place your sell order in the Demat account of 200 shares you can do it through your trading account.
But to deposit cash in the trading account you will need to in your bank account. So you should be linked to your bank account with your particular trading account this is the working of the Demat account.
Suppose you have 1 lakh in your bank account and you want to transact 50,000. So first you have to put Rs 50,000 from your bank account into your trading account. Then you can buy any part with that 50,000. So you can only transact in shares through a trading account.
How To Buy Stocks Using Demat Account?
But if you want to get those shares you need to buy them in your Demat account. A Demat account is like your bank account you can easily buy and sell your share through a Demat account. Like a bank transaction withdrawal and deposit. Demat account stores your valuable shares in the account and each share has its own unique ISIN code.
A Demat account is an abbreviation for a dematerialization account. Dematerialization means storing your physical share certificates in electronic form. Two organizations in India maintain Demat accounts. NSDL and CDSL. These are called depositories.
Suppose you have 1 lakh in your bank account and you want to buy 10 shares of the company which is Rs 10,000 then you have to transfer Rs 10,000 from your bank account to your trading account. After that, you can place an order for those 10 shares.
Around the same time, someone else will have to place a sell order for those 10 shares. When an order is purchased and the order matches, the order is executed. Then Rs. 10,000 is transferred from your trading account to the seller’s trading account and shares are transferred from the seller’s Demat account to your Demat account. The execution of this entire cycle takes T + 2 days.
How To Buy Stocks Using Demat Account?
T + 2 means trading day plus 2 days. So if you have done the transaction on Monday you will have the shares given to you on Wednesday evening and the shares will be debited from the Demat account of the seller on Wednesday morning.
In today’s time and age, you can open a Demat account as well as a trading account with any broker. Many people question whether they can only open a trading account or a Demat account. Yes, you can do it But you will not benefit much from it.
For example, if you have only opened a trading account and made a transaction in the shares, where will you get the delivery of the shares? So if you have only a trading account then you can only trade in the future and options which are settled in cash and do not need a Demat account.
Or if you want to open only a Demat account then how will you buy shares? If you are buying shares in IPO allotment and want to sell them too, you cannot sell without a trading account. Many people also have a question that you do not get delivery of shares in intra-day trading. Do they still need a Demat account for this?
correct. As per SEBI guidelines, if you are trading in the equity segment, it is mandatory to have a Demat account. I hope that now you have come to know all about trading and the Demat account.
Friends, here I have told you all about How Does Demat Account Work? is done. If you still have any questions, please write to us in the comments. How Does Demat Account Work?
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You want to transfer your Demat account to another broking firm. You can change your broking firm through CDSL. You need to fill the physical form or online form of share transfer or Demat account transfer. First, you can apply to open a new Demat account. You want to open an account with your favorite discount broker. Then you apply for a share transfer.
When you transferred the shares from one account to another Demat account. It takes 3-4 working days to transfer the share to a new Demat account. After the share is transferred to your new Demat account check your portfolio and close the unused Demat account.
lose your Demat account you need to find that. How it gets back. When you open a Demat account with a particular discount broker they send you a CDSL And NSDL number Through the mail. First, you need to Find the mail the particular broking firm sent. In this mail, you got your client no. Using it you can find Broker.