Difference between Demat and Trading Account

5paisa Research Team

Last Updated: 07 Mar, 2025 02:31 PM IST

Difference Between Demat Account and Trading Account

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Introduction

Stock Market is the collection of markets and exchanges where people buy, sell and issue shares of publicly-held companies. People invest their money in buying shares in the hope of huge returns. To purchase, hold and sell shares, you need to have a Demat account, a digitally functioning account used to hold dematerialised securities, including stocks, mutual funds, bonds, etc.

What is Trading Account?

Trading account is required for conducting your stock trading activities effectively. You are allowed to deal in (buy and sell) shares through your trading account for the purpose of trading.

Demat vs Trading Account

First of all you must be know what is Demat account? and what is trading account?, you must be aware how stock market would work before digitization. Thousands of people would be shouting and screaming at the top of their voice to place their orders. Well, gone are those days as digitization has made everything available online. You can place orders through your trading account and store the bought securities in digital form in your Demat account, all from the comfort of your home and in a few clicks. Trading account enables you to participate in trading of other financial instruments, like Futures and Options, ETFs, etc.

Difference between Demat and Trading Account

Let us find out the differences between a Demat and Trading Account based on multiple parameters:

 
Parameter Demat Account Trading Account
Functionality Stores and transfers digital shares and securities Enables buying and selling of shares using technology like smartphones/laptops
Nature Shows the shares and securities you own Shows details of transactions carried out in the stock market
Role in IPO Required to apply for an IPO. Acts as a repository for holding allotted shares Not compulsory for applying for an IPO. Can trade in Futures and Options without Demat account
Identification Number Unique Demat Number for identification Unique Trading Number for trading in the stock market
SEBI’s Approval Mandatory approval from SEBI and NSDL for opening a Demat account No SEBI approval required for opening a trading account.
Annual Maintenance Charges (AMC) Requires Annual Maintenance Charges (AMC) to be paid

No AMC charged for a trading account

 

 

 

More About Demat Account

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. For detailed disclaimer please Click here.

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