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What is a Trading Account? How different is it from a demat account?

A trading account is similar to a bank account. An investor or a trader can keep their funds in this particular account. The major differences are that unlike a traditional bank account, a trading account is held by a financial institution–not a bank. It is administered by a broker or an investment manager. The purpose of such an account is to keep cash that will be used to purchase securities. This type of an account not only contains cash but also securities that a trader wants to hold on to until the time that they are ready to sell. As a trading account holder, you can employ different trading strategies in order to conduct transactions such as intraday trading, trading on futures and options, etc.

Trading account, demat account–what’s the difference?

Trading account can easily be confused with a demat account. However, that’s not true. The account meant only for trading can only be used to purchase and sell shares. Demat account on the other hand, is where you deposit the shares that you purchase. When you want to sell your shares, you have to access those from your Demat Account and then complete the transaction through the trading one.

Previously, trading of shares on the stock exchanges involved a lot of paperwork. Since the time that all transactions on stock exchanges have become electronic, a trustworthy, secure and easy-to-use trading account has become an absolute necessity.

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