Skip to main content

What is the significance of having DEMAT Account?

By
Demat Account stands for dematerialized account. In this account, all the securities and shares which a trader holds is electronically placed.A trader has to open this account with a registered broker or discount broker.The process of conversion of shares into electronic form is known as dematerialization. Once your Demat account has been opened you will get a specific account number and a DP ID number which has to be retained by the trader for future communication.

Earlier traders possess physical copies of all the shares and securities which they hold and it was really difficult to preserve those copies. With Demat account, several traditional trading barriers have been removed. Some of the biggest advantages of Demat account are discussed below:

1)It is a time-saving approach to trading. Within a fraction of second traders can transfer, buy and sell shares using their Demat account without wasting much time.

2)In one single account all the mutual funds, equities, shares, bonds can be held. No separate account for different securities is required.Also at one place traders can check the status of different securities. They do not have to visit separate different accounts to do so.

3)Chances of losing physical certificates by some means like robbery, theft get reduced. And no more traders have to worry about the security of shares which they have in physical form earlier.

4)All orders are securely placed with the depository participant. Therefore traders do not have to visit different companies whose shares they are holding again and again.

5)Traders can trade in any number of shares even 1 by having Demat account which was not possible earlier when shares were physically held by the traders in the form of certificates.Traders can take a decision on the basis of their investment goals entirely and not have to focus on any other constraint.

6)The unnecessary cost of issuing and distributing physical copies of shares by the companies has been eliminated. Although now also if a trade wishes to have a physical copy of his shares he can. He just has to make the request for the same and pay its charge.

To begin with trading in equities, shares, bonds etc the primary step is to open Demat account. Without this, a trader can not begin with trading.With Demat account, Indian capital market has gained several benefits in last few decades and also made the entire process of trading very easy.


However, it has a disadvantage as well. As this has made the entire process online, that is the Internet is a must. Traders who lack in having knowledge about the Internet or not skilled enough to use it find it difficult to trade. But yes there are brokers who can trade on their behalf, overcoming this barrier for them by charging commission.
Labels:

Comments

Post a Comment

Popular posts from this blog

What is MIS, NRML and CNC order types in stock market ?

By
MIS (Margin Intraday Square Off) MIS order types are for intraday traders and need to squared off during the same trading day. It will be activated till that particular trading day only.The biggest advantage of this order type is that while buying shares using it traders need not to pay the entire amount only a margin amount is required to be paid.Because of this feature traders can buy more number of shares with less capital. If in case position is not squared off or converted into other order types by the traders end then it will be automatically squared off by RMS few minutes before the market closes. If you want to strictly trade on intraday basis then you can rely on usage of such order type. As here you need to worry about squaring off your position, it will automatically get squared off before market closes. NRML (Normal Order) NRML order type is used while trading in future market. It is used to carry forward trade orders in derivatives segment. This order type w...
Post a Comment
Read more

What are the advantages and disadvantages of pair trading ?

By
Pair trading is a market neutral trading strategy which enables traders to make a profit under different market conditions.Without learning about the recent market trend a trader matches a long position with a short position in a pair of highly correlated shares, commodities, currencies or etfs. Usually, the pairing is done in shares of companies which belongs to the same industry. Demat account and trading account are required to trade using this strategy like in others. Advantages of pair trading are discussed below: No risk from market direction Direction risk means risk associated with movements in price because of change in market direction. For an example, a short position is exposed to the risk that stock prices may rise.In pair trading, no such risk exists. Because here profit depends on the difference in price changes of two stocks which are in the pair not in the direction in which they move. Limited risk and profit in different market conditions The co...
Post a Comment
Read more

Tips to become a successful day trader

By
Indian share market has attracted various investors towards itself by its good performance and has become an attractive source of investment now. Returns earned on investment in shares by long term traders is higher than investment in other markets and assets. However high capital is required to trade on a long-term basis. Another way by which traders can trade with less capital and earn good returns is intraday trading. Day trading means not holding your position in stocks beyond the current trading day. To trade on intraday basis traders need to have  Demat account  and trading account. The risk associated with this type of trading is high. Some useful tips to become a successful day trader are discussed below: Trade by using a practical approach Movements in intraday stocks are based on the market fluctuations.To earn good profit here traders have to trade on the basis on present market movements.When the market is bullish instead of waiting for large movements...
Post a Comment
Read more