Investing in the stock market requires two key accounts: a Demat account and a Trading
account. While they work together, they have very different functions. Think of it like a bank
account system for investments. Your trading account is for making transactions, and your
demat account is where your investments are safely stored

What is a Demat & Trading

A Demat account (short for “dematerialized account”) is an electronic account that holds
your securities, such as shares, bonds, and mutual funds, in digital form. It’s the digital
equivalent of an old-fashioned physical stock certificate.

How it works: When you buy a share, the share is delivered to your demat account.
When you sell a share, it’s debited from this account. This eliminates the risk of
theft, loss, or damage associated with physical certificates and makes transfers
and transactions much faster and more efficient. The account is maintained by a
Depository Participant (DP), which acts as an intermediary between you and the
central depositories (like NSDL or CDSL in India)

What is a Trading Account?

A Trading account is the platform you use to buy and sell securities on the stock
exchange. It is the active account that facilitates all your market transactions.

• How it works: When you want to buy a share, you place an order through your
trading account. The broker (who provides the account) sends this order to the
stock exchange. Once the order is executed, the funds from your linked bank
account are used, and the shares are then credited to your demat account. When
you sell, the shares are debited from your demat account and the proceeds are
credited to your bank account.

The Crucial Relationship: Demat & Trading , and Bank Accounts

When you buy, money flows from your bank account to the broker via the trading
account, and the purchased shares are credited to your demat account.
When you sell, shares are debited from your demat account via the trading account, and
the money is credited back to your bank account.