Before understanding the trading process via the Demat account, let us understand the importance, features, and benefits of the Demat account first.
The functionality of the Demat account closely matches a bank account. Like saving your cash in a bank and being able to access it online, your securities are saved in your Demat account. You can likewise debit and credit your securities or even a zero balance in your Demat account.
Every trader requires a Demat account to hold his securities from where he will be able to credit and debit his securities. Earlier, it was too difficult to trade due to the carry of physical certificates which are not accessible; not a quick process for trading but the problem has been solved since the Demat account comes. A trader can hold his securities in dematerialised or in electronic format. The new pronouncement has also been made by SEBI for the Mandatory Dematerialization of physical shares held by a trader.
How to trade with a Demat account:-
From the above section, we get to know the Demat account’s importance and its features. Now let us understand how to trade with a Demat account step by step:-
Step 1: If you make up your mind for trading then your very first step is to search for an excellent depository participant who always stands by you while trading and give you perfect insights and keep on guiding you with his thorough research, homework, and daily updates which are going on in the world of business, financial sector and into the markets. Now, are you a bit confused by the term depository participant (DP)? Depository participants (DP) are those who are registered with NSDL or CDSL with whom investors like you open a Demat account before starting their trading. Contacting Depository participants (DP) and their support play a vital role in investor life.
So make sure, you contact a reputable company that has a name and fame in the stock exchange, well established because they will have lot of resources to guide you in various ways and also, make friendly relation with them with whom you can contact frequently regarding your investments and future roadmap.
Step 2: Make sure your trading account should be linked with your Demat account because buying and selling of stocks only go through Demat account itself. Although trading accounts and Demat accounts can be with different companies, it will be good to keep with the same company so that you’re trading goes more smoothly without suffering from hassles.
Step 3: Once you are done with your depository participant (DP). Open a trading account and Demat account with proper interlinking of them then start your trading and place your very first order through your trading account. Your stockbroker in India will connect you to the applicable exchange.
Step 4: Your order will start processing in exchange. They will check your Demat account details and your order details along with your transactions.
Step 5: Once the order is processed, your shares or securities will be credited or debited from the Demat account. The Demat account makes trading super simple and convenient for traders.
Also Read: How to choose the Best Demat Account?
Benefits of Trading with a Demat Account:-
Trading with a Demat account makes the whole exchanging process very productive and advantageous. There are other several major benefits associated with the Demat account:-
1. Too Much Cost-Effective – Physical stock certificates cost extra charges from investors due to stamp duty, handling charges, and other costs like transferring of securities put on additional high charges on traders but by having Demat account, investor free himself from these hassles and extra charges.
2. Super Time Saving – Prior, it used to require a long time, i.e. a week to settle your stocks and shares. Demat accounts have made it undeniably faster and prompt. And nowadays, time is more important.
3. Availability – Due to the Demat account, you can access your securities from anywhere and at any time as your securities are saved digitally through the Demat account.
4. Avail Loans – Holding your securities in a Demat account can help you to take loans for yourself, which is the best attribute of a Demat account. Your securities will be counted as your assets on whom you can take loans.
5. Corporate Benefits – Your returns and dividends will also be deposited in your Demat account only; it will be reflected in your record.
6. Super Safe and Secure – Keeping your securities safe and secure is very essential.