Demat & Trading Account

Demat Account is used to hold shares and securities in electronic format. Demat account is mandatory in order to invest or trade in Stock Market in India.

What Is A Trading Account

A Demat account is for holding stocks, bonds, mutual funds, and Exchange Traded Funds(ETFs) and other securities. Whereas a trading account is for buying or selling of shares on the stock exchange.

It has to be linked to a bank and a Demat account to trade. When a company lists on the stock market, its shares become available for trading on the stock exchange.It has to be linked to a bank and a Demat account to trade.

When a company lists on the stock market, its shares become available for trading on the stock exchange. Earlier, the exchange had an open-outcry system. In the mid-90s, the stock exchanges adopted the electronic system.


This means, all trades were conducted electronically. Simply put, you didn’t have to go to the counter and place an order physically. You could do it through a computer, which would verify the details, the market price, and process the trade.

For this reason, you need a special account through which you can conduct transactions. This is called the trading account. Without one, you cannot trade in the stock markets.

You register for an online trading account with a stock broker or a firm. Each account comes with a unique trading ID, which is used for conducting transactions. You can use your Demat Account to hold a wide variety of financial instruments like equity shares, mutual funds, government securities and exchange traded funds. It allows you to conduct multiple activities, including trading and investing at the click of a mouse

What Is Stock?

A stock is a general term used to describe the ownership certificates of any company. A share, on the other hand, refers to the stock certificate of a particular company. Holding a particular company's share makes you a shareholder.

Stocks are of two types—common and preferred. The difference is while the holder of the former has voting rights that can be exercised in corporate decisions, the later doesn't.

However, preferred shareholders are legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders.


There is also something called 'convertible preferred stock'. This is basically a preferred stock with an option of converting into a fixed number of common shares, usually any time after a predetermined date.

What Is IPO (Initial Public Offering):

IPO or Initial Public Offering is a type of security that is offered by a company directly to the end investor. IPO is a method employed by a company to have an access to more funds in order to scale up their operations or to develop their business.

In an IPO, the company offers an investor a slice of its own company with the right to profits in the way of shares.

IPO is traded in the primary stock market - an investor can directly buy shares from the company and then trade it in the secondary stock market. In the secondary stock market, the shares are listed and are traded on a daily basis by investors. A company issuing an IPO can issue any number of shares as authorized by its articles. The collective raised from the issue of the IPO is known as “raising capital” by “going public