Two of the most important requirements for trading in a stock market involves, a demat account and a trading account. A demat account is an account in which you can store your shares or other classes of assets in a dematerialised form. A trading account is an account that enables you to transact.

What is a Demat Account?

Demat is simply an account that allows you to hold your shares in an electronic format. A Demat account converts the physical shares into an electronic form, therefore dematerializing them. On opening a Demat account, you will be given a Demat account number to be able to electronically settle your trades. The workings of a Demat account is very similar to that of a bank account where you keep your money with the option to deposit and withdraw. In your Demat account too, the securities are held and accordingly debited and credited. You do not need to have any shares to open a Demat account; In fact, you can even have zero balance in your account.

What is a Trading Account?

To conduct your stock trading activities you require a trading account. This is because when a company lists its shares in the stock market you can trade the same on an electronic system through a special account known as a trading account. You can get such an account by registering with a firm or a stockbroker. With this account, you are assigned a unique trading ID which grants you access to conduct trading transactions.