Table of content

Difference Between Demat and Trading

Table of content

Difference between Demat and Trading Account

If you are planning to trade in the stock market, you may have come across these terms demat account and trading account. While many new investors use both these terms interchangeably, it is important to note that they are quite different from each other. Each type of account serves a specific purpose, and you need both to invest and trade in the share market. In this blog, you will understand the difference between the two and how they help you in your trading & investment journey in the stock markets.

What is a Demat Account?

A demat (or dematerialised) account holds your shares and securities electronically. It helps you track your investments, including Stocks, Margin trading facility, Mutual funds, Exchange-Traded funds, Bonds etc., in a single place.

Just like a bank account, every demat account has a unique account number. The demat account number serves as the identifier for your investment with a specific depository participant. As an investor, you need to make a note of your demat account number and quote it in all your communications with the broker.

What is a Trading Account?

A trading account enables you to buy and sell shares of various companies listed on the stock market. The shares purchased using a trading account are stored in the demat account electronically. And when you wish to sell your shares, you can use your trading account to sell them. With m.Stock, you can open a trading account and access features like advanced technical charts, live news and market updates, pre-designed index baskets, flexible watchlists, etc.

Demat account v/s Trading account

Demat Account Trading Account
It is used to store stocks and securities in a digital format. It is used to buy or sell stocks and securities in the stock market.
A demat account can be opened without buying any stocks or securities. It is necessary to transfer the funds from the bank account to buy securities.
You can freeze your demat account anytime and for as long as you want to ensure there are no unpredictable debits and credits in your demat account when you are not using it. A trading account can be considered as a bridge between your bank and demat accounts.
When you have a demat account, you can convert your physical shares into electronic format by submitting a dematerialisation request. A trading account allows you to trade through various exchanges, and it can be accessed on your mobile, laptop, tablet, etc.
A demat account gives you the benefit of getting dividends, returns or interest automatically in your account. With a trading account, you can access all the stock exchanges in India including BSE, NSE, commodity exchanges and derivatives exchanges.

Demat vs Trading account: Know the functionality

The major difference between the two accounts is the functions they perform. While a trading account is used to buy and sell securities, a demat account allows an investor to hold their securities in an electronic form.

For example, to buy 500 shares of ABC Ltd, you can use your trading account to carry out the transaction. Once you purchase the shares, they are credited to your demat account, and it remains in the demat account till the time they are sold. Let's say that out of the 500 shares, you decide to sell 100 shares, you can use the trading account for selling, and your demat account will be debited by 100 shares, and 400 shares will remain in your demat account.


Demat account and trading account work in tandem. You must open both accounts if you are looking to trade in the financial markets. m.Stock is a one-stop solution to invest in various securities, including equities, mutual funds, bonds and currencies.

Frequently Asked Questions

Trading and demat accounts have different functionalities. They both are vital for investing in the stock market. A trading account helps you buy and sell shares, while a demat account helps you store them electronically.

The ideal demat and target account offers a seamless and user-friendly interface with analytical tools at low or zero brokerage. m.Stock offers all these features and more and lets you buy shares, futures and options, IPOs, currencies and mutual funds.

Different brokers have different fee structures for demat and trading accounts. With m.Stock, you can open a demat and trading account at a one-time brokerage fee of ₹999 for a lifetime.

Theoretically, it is possible to have a trading account without a demat account, but stockbroking firms generally open a demat account for customers with a trading account at no additional cost.

More Related Articles

how do i withdraw money from my trading account

28 December,2023

How to Withdraw Money from Your Trading Account?

The stock market is a dynamic space where the prices of assets constantly fluctuate in either direction. If you successfully execute a trade and manage to leverage the price movements to your advantage, you can earn decent profits over time. Profitable trades occur in any one of two ways. You can either buy an asset at a lower price and sell it at a later point in time at a higher price, or you can short-sell an asset today and buy it later at a lower price.

How to Protect Trading Account

16 October,2023

Ways to Protect your Trading Account?

The trading account is an indispensable tool for purchasing and selling stocks, bonds, mutual funds and other securities through the stock exchange. In addition to being the gateway for participating in the secondary market, your trading account also holds your investment capital safely.

Types of Trading Account

16 October,2023

Types of Trading Account In India

A trading account is a mandatory requirement for buying and selling securities in the secondary market. When linked with a demat account and a bank account, it facilitates seamless trades and dematerialised holdings. However, if you are just getting started with your journey in the financial markets, you need to know what the different types of trading accounts are.

Open your Lifetime Free Brokerage Account Onboarding in just 5 minutes**

T&C and privacy policy

Power your investments with our smart trading platforms

  • app_download_icon_img
    5 million+
    App downloads
  • 1_Click_icon_img
    Order Placement
  • higherreturns_icon_img
    2,361 Crore+
    Average Daily Turnover