A Demat account is absolutely essential if you want to trade in India with Indian or foreign securities. This is a compulsory regulation mandated by SEBI. However, many people who are new to the world of trading often wonder how to trade using a Demat account. It can be daunting to adjust to a new technology that handles all of one's trades online. Especially when some individuals are not sure about how to open a Demat account in the first place. Luckily answers to both those questions can be found here. Here is how to trade using a Demat account.
How to trade using Demat account
- Select a depository participant or DP with whose help you can open up a new Demat account. You will be required to pay a one-time account opening fee. On top of your one-time fee, you will be required to pay an account maintenance fee.
- As a next step, you will be required to link your Demat and trading account together if you wish to actually make use of your Demat account. Although it doesn't matter if the companies for each of your accounts are different, it is recommended to keep them the same.
- Once both accounts are linked, to actually start your trade, you will be required to book an order using your trading account. Following this, your broker will connect you to a trading exchange that is relevant such that your trade can be executed.
- Once you are at the exchange, your order will be processed. Various details regarding your order including relevant details about your Demat account will be cross-checked.
As soon as your order is processed, your Demat account will be credited or debited with electronic copies of the securities you were trading.
Benefits of Using A Demat Account
The process of trading with a Demat account makes the entire trading process extremely efficient and convenient. The most obvious advantage of using a Demat account is the ease of use. However, there are other benefits of using it as well.
1. Convenience: Since the advent of electronic trading using a Demat account, training has become a lot less tedious. Not only are your securities stores in one single place, but you can quickly access them and all their relevant details at any point anywhere.
2. Easy Transfer of Shares: Facilitating the transfer of securities is also a lot easier through a Demat account. Earlier it used to take entire weeks to settle a trade, Demat accounts have made this process a lot swifter than before.
3. Cost-effective: Added costs are often associated with stock certificates. These include handling charges, stamp duty, and other costs that are involved in the transferral of securities. Trading has gotten rid of these costs through the adoption of Demat accounts, making the entire process a lot more cost-effective.
4. Availing of Loans: Among the best features of holding securities in an electronic form in one’s Demat account is that this account can help you avail of a loan. Securities you buy can be used as collateral and you can secure a loan using them from the convenience of your smartphone device.
Conclusion: The process of trading using a demat account is fairly straightforward, but it is important to read the steps and follow them properly, especially if you are a beginner. This way, one will avoid making any mistakes that could prove costly.
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