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Understanding Demat and Trading account relationship

by Manish Chauhan · 70 comments

Some of the beginners to online stock trading do not understand relationship between Share Trading account and Demat Account . In this short article lets see the relationship between Demat account , Trading Account and your Bank Account . We will also see how many trading or Demat account you can have in total .

Work Flow

Below is a short chart where I have tried to give the flow when you buy a share . click to Enlarge


Demat Account : Account where your Shares are stored in electronic form .

Trading Account : An account which is used to place orders for Buying and Selling of shares .

So Trading account is an interface between your Bank account and your Demat account , when you buy something , Trading account takes money from your Bank Account (Its already taken from your Bank account and saved in Trading account) and buys shares and stores it in your Demat account . When you Sell something , Your trading account takes back the shares from your Demat account and Sells them in Stock Market and get back the money and that goes back to your Bank account (actually you manually transfer it to Bank account from Trading account most of the times .

Question : Does any one know maximum how many demat account can one open ?

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{ 70 comments… read them below or add one }

1 Anonymous September 7, 2009 at 12:39 am

No limit on number of DMAT account by a person.

Personally I had 4 DMat account out of which 3 are active at present (as far as I know)
Obviously I am paying for 1, rest are bouncers

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2 Jayan July 3, 2014 at 9:57 am

I have 3 Dmat accounts, out of three only one has shares and ncd’s under india infoline, others have no shares not operating nothing, dp holding companies always sending info i have pending amc needs to pay. How can i solve this issue without paying amc, i have no shares holding. Thank You

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3 Manish Chauhan July 3, 2014 at 9:56 pm

i m not clear of ur question

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4 Jayan July 4, 2014 at 12:43 pm

I have 3 active dmat accounts, out of three i am using only one dp belongs to India Infoline. Other two DP’s have no shares nothing,still AMC is charging, i have no money to close now, How can i terminate my two DP’s free of cost

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5 Excel Matic September 7, 2009 at 8:05 am

@Anonymous: There is a limit on number of Demat accounts you can have.

Though I am not sure about this number, but have got to know from my broker that an individual can have maximum of 5 demat accounts on his name.

@Others: I agree with the author's view that many people do not understand the difference between the trading account and the demat account. With this, people are do not research much about which broker should they choose or what parameters should they look at other than brokerage to select a broker.

I have expressed some of my views here, probably they might help. Link – http://blog-bizzare.blogspot.com/2009/09/which-broker-to-hire-for-new-trading.html

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6 Puneet September 7, 2009 at 11:17 pm

You can have as many demat accounts as you wish to…
The only catch is, legally, you cannot apply for IPO from all the accounts. One application per PAN holder is allowed.

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7 Maurya September 7, 2009 at 11:38 pm

Theoretical knowledge is good, but doubts remain on the practical side.

1. Examples of demat and trading accounts?

2. What do we get when we open an account at, say, reliance money? Both the accounts, or just one of these?

3. Can we mix and match e.g. reliance money trading account with kotak demat account? Or is demat account not associated with any broker but directly held with NSDL?

4. For which account do we pay the various fees (per transaction, yearly etc.) ? Can we hold one and close the other e.g. if I do not want to trade for a while, can I close trading account but keep the demat account open? Will it save me significantly on annual fees?

5. Is it possible to not hold demat account but still trade? Can I get shares in paper form?

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8 Anonymous September 8, 2009 at 12:00 am

@maurya

U can mix any trading account with Dmat account, in such cases you can't do online trading (Practically), as Dmat will not be linked with online trading a/c.
Whenever you sell, you need to fill Depository receipt and give it to your trading account partner.
This is the way people uses in smaller cities, where Dmat-online trading still not SO HOT.

AS such trading account doesnt have any fee associated with them, only charge might be First time account opening and Software Charge. They earn via Brokerage
DMAT account has Annual maintance charge, custody charge etc

Now it is impossible to trade without dmat account.
Shares on Paper –(transfer)—> DMAT is possible
DMAT —-> paper is impossible

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9 Blog Bizzare September 12, 2009 at 11:40 am

Hey all,

After reading this post, I thought I should write in little more detail abut the demat and the trading accounts.

@Smart Investor: please allow me to post this link here

Link – http://blog-bizzare.blogspot.com/2009/09/what-are-trading-accounts-and-demat_11.html

Reply

10 Manish Chauhan September 12, 2009 at 1:46 pm

@Blog Bizzare .. nice link . Thanks

Manish

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11 Anonymous September 15, 2009 at 2:58 am

Good reaad.. quite detailed infor… so even if i take any demat account the system or the online trading firm would work in the similar manner.. ?? be it rmoney / icici / sharekhan/

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12 Manish Chauhan September 15, 2009 at 3:18 am

@Anonymous

Yes , you are correct

Manish

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13 Anonymous October 12, 2009 at 1:00 am

yeah, no limit to the number of article.. been using two for quite some like reliance money and 5paisa.. and faced no troubles..

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14 manish January 28, 2010 at 6:44 pm

Great

thanks for the review .

manish

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15 Sanjay Khantwal January 24, 2010 at 11:12 pm

Great. Good piece of information.

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16 manish January 28, 2010 at 6:44 pm

Thanks Sanjay

Manish

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17 Mukul February 18, 2010 at 4:59 pm

You continue to contribute to the investment quotient of a common man who is tentative to enter the big, bad world of stocks, trading and making money.
Keep it up!!!

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18 Manish Chauhan February 22, 2010 at 8:25 pm

Thanks Mukul

Manish

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19 lavanya May 20, 2010 at 10:00 pm

manish
i have been following this site for 2 months. quite informative. thank u.
is there any ‘the best’ stock broking agency? or are all pretty much the same?i am planning to open a trading account and would like the information.

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20 Manish Chauhan May 21, 2010 at 11:22 am

Lavanya

I am not sure about best broking agency , unless you trade and invest heavily , it wont matter much .

Manish

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21 lavanya May 24, 2010 at 10:59 am

thank u.
i will be investing only for long term and not day trading so may be i will go with sharekhan .

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22 Manish Chauhan May 24, 2010 at 11:58 am

Looks good

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23 caribou May 22, 2010 at 8:35 pm

Hi Manish,
Is it possible to buy and sell mutual fund through Demat Account? If possible, is it easy?
Please tell me which demat account (eg. SBI demat, Axis Bank demat, etc) can be used to buy and sell mutual fund?

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24 Manish Chauhan October 11, 2010 at 6:03 pm

ICICI would be good , I have not tried it , but it should be easy .

But its not recommended to buy frequently as costs would be high

Manish

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25 rao July 4, 2014 at 3:53 pm

is there any risks in intraday trading , what are the charges

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26 Manish Chauhan July 4, 2014 at 7:11 pm

Intraday trading is only full of risk :)

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27 rao July 5, 2014 at 4:14 pm

thanks ….

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28 vijay sharma October 7, 2010 at 5:42 pm

Can I associate more than one trading account to my reliance dmat account?
2.Does DMat account provideer charge something on every brockrage or only annual charges?

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29 Manish Chauhan October 11, 2010 at 6:03 pm

Vijay

1) Yes
2) depends on them

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30 Purushottam August 29, 2011 at 10:47 pm

One query v imp pls.

I have lost heavily in shares ( put my story up earlier if anyone remembers lost 9 lakhs till now )

I have one account with ICICI savings+demat+ trading
I dont want to trade any more as I have a bad habit and I fall in the trap
Following are my queries pls answer –

1) Can i close my ICICI direct trading account while the demat account remains open ?
2) I have couple of infra bonds of 5 year lock in and mutul funds worth 1 lakh and share worth 10k . What will happen to them if i close the trading account ?
Can they remain in demat ?
3) In future i wish to only buy or sell mutual funds or buy infra bonds for tax saving . Is it possible without trading account ? only with demat account by filling slips etc ?

Pls answer if anyone knows about this

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31 Pradeep May 23, 2012 at 12:04 pm

Hai ,

I just joined a company for commodity share trading,they told me to create a Demat account,will it be chargeable for me,will i need to submit my bank account to new demat account
can i have your contact number to contact you,

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32 Manish Chauhan May 23, 2012 at 12:17 pm

Ask that same company ,they will give you charges details

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33 ashish October 1, 2012 at 7:09 pm

Hi Manish.i am new to this world of numbers.thought of investing some amount in buying shares.friend of mine suggessted to open account with icicidirect.do ineed to open 3in 1account.which bank is better for opening these account.how much do they charge?

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34 Manish Chauhan October 2, 2012 at 1:09 pm

Thats very much a company specific information , 3-1 account is more of saving + demat + trading . If you just want trading account, then no need to open saving account .

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35 Prashant October 8, 2012 at 3:10 pm

This link is so helpful.
I am planning to invest some money in bse, but I’m waiting for my pan card. (I’ve applied for it on 24th Sep and I’ll get it in couple of days).
But Sir, I have a query. While opening an demat account, will I have to deposit some money in demat account ( like minimum balance or something)
I’m asking this question because while looking for brokerage companies I got this “After registration, you will be required to deposit a certain amount of initial margin deposit with them. The deposit can be of any amount, but it should not be less than Rupees Five Thousand”.
The above statement was for 5paisa comp….
Also I’m looking forward to trade with Angel Broking. Is this a good move, please reply.
Thank you

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36 Manish Chauhan October 8, 2012 at 9:11 pm

Its only required if you want to do any trading, else not . Also better go with some better trading company like angel is good

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37 Prashant October 9, 2012 at 10:15 am

Thanks…. :)

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38 VijayKumar October 12, 2012 at 8:17 am

Hi Manish ,

Please advise me , i am very new to this world of stocks, I would like to invest in Gold like SBI GOLD ETF etc….Please tell me how the price of the GOLD ETF will change (like as per the GOLD rates or like shares)In gold the price changes day by day.What i need to have to invest in the GOLD ETF of any company. How this investment will work . Advise me clearly.

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39 Manish Chauhan October 12, 2012 at 10:22 am

Gold ETF are just like stocks, people buy and sell as per their assumptions on the market price and the real market price, so it will move as per the gold price only, you need to have a demat account to buy and sell gold ETF .

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40 Amit Pendse January 31, 2013 at 11:40 pm

Hi,
I have a trading account in sharekhan. But where do i find the trading account number on its site? I can only see dmat account number on it. Its been years since I have used sharekhan so I dont have any documents or letters from sharekhan where I can find it. Please help me its urgent.

Thanks
Amit Pendse

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41 Manish Chauhan February 7, 2013 at 2:00 pm

Why dont you talk to their customer care on this ?

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42 Vishal June 3, 2013 at 1:07 pm

I m new to market. I want to open demat acc. with SBI. I want to buy n sell shares by my own (through online) , not by any broker.
Is it necessary to hav trading acc.?
Wat is demat and trading acc?

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43 Manish Chauhan June 4, 2013 at 3:35 pm

You can do that .. but SBI in this case is your broker :)

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44 GOLDY June 11, 2013 at 4:52 pm

Hi Manish
I have a trading account with angel broking and demat a/c with pnb . i would like to sell my shares what is the actula process angel says i need share in our pool only then we can sell and pnb says first you have to sell your holding and mention the statement no on delivery slip then we foreword.i am confused in between this two company we cant sell my holding shares please suggest the actual process w. Please help me its urgent.i have only one demat a/c with PNB

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45 Manish Chauhan June 14, 2013 at 11:15 am

Goldy

You can get help on this at our forum , I personally dont know the answer – http://www.jagoinvestor.com/forum/

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46 shweta nair September 4, 2013 at 12:16 pm

are shares transferable to other person? if yes what is itz procedure

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47 Manish Chauhan September 7, 2013 at 5:26 pm

Definately they are. You can always sell them to anyone. Please ask about the procedure on our forum – http://www.jagoinvestor.com/forum/

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48 pradeep September 21, 2013 at 1:40 pm

I am a beginner… help me out step by step.. i have a demat account with hdfc bank.. what shud i do to start buying and selling shares.. also. do i need a trading account also.

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49 Manish Chauhan September 25, 2013 at 1:54 pm

I wrote this long back , but should give you a good start – http://www.jagoinvestor.com/2009/07/small-guide-for-newcomers-in-stock.html

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50 neha mande October 2, 2013 at 4:41 pm

nice post…. your diagram helped me a lot
thanks

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51 Manish Chauhan October 7, 2013 at 8:11 am

Thanks Neha

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52 Manoj October 24, 2013 at 5:56 pm

Hi Manish,

Thanks for your posts. Its very informative.

I’ve a query. I’m currently holding a trading and demat account. Demat account have a MF and Infra bond. As now days I’m not trading, I want to close these accounts.

As I contact my DP, they mentioned that I can not materialize MF and Infra bonds. So I can not close my demat account. I’m feeling that I’m wasting money on annual charges. Any way out?

Thanks.

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53 Manish Chauhan October 26, 2013 at 9:30 am

Why cant you redeem the account .Ask them to give you reply on this and tell them you are planning to reach banking ombudsman and SEBI .

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54 Manoj October 27, 2013 at 1:05 pm

Thanks Manish. I’ll contact them.

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55 Sunetra Sen January 11, 2014 at 1:15 pm

Hey Manoj,
What was your experience finally? I have posted a similar question in the thread and maybe you can answer it based on your experience?

Thanks,
Sunetra

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56 hunny December 6, 2013 at 5:11 pm

3 accounts max.

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57 Sunetra Sen January 11, 2014 at 1:12 pm

My question is that if I close my trading account with brokerage company #1 then will it impact my demat account in any way? I have used the same demat account to also allocated Infra bonds in demat format.

Also, if I open a trading account with brokerage company #2, can I link their trading account to my existing demat account?

Please can you help me here?

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58 Manish Chauhan January 14, 2014 at 12:45 pm

Hi Sunetra

I think I have less info of this, please use our forum to ask this – http://www.jagoinvestor.com/forum

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59 sheetal chauhan February 1, 2014 at 6:53 pm

hello sir,,,i read you artical,,but now i am also confuses between trading account and demat account

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60 Manish Chauhan February 3, 2014 at 5:46 pm

What the confusion ?

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61 sandeep verma May 28, 2014 at 12:46 pm

sir, i want to start sell, purchase share and trading, is both are different and should it need different account to be open for both purpose, Open a demarcate account with icici bank is good or not, if not then tell me good company.

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62 Manish Chauhan May 29, 2014 at 9:59 am

ICICI is good enough .. go for it !

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63 saurabh June 5, 2014 at 12:21 pm

sir can i have a dmat account without having a trading account. if yes how will it affect me..???

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64 Manish Chauhan June 11, 2014 at 10:42 am

Yes, you can have it , but then you cant sell or buy !

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65 Naresh June 26, 2014 at 5:22 pm

I like to buy/sell shares from my Citi demat account using a trading account with HDFC/IIFL. Is it technically feasible?

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66 Manish Chauhan July 3, 2014 at 10:53 pm

Yes, it should be

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67 Raaj sekhar July 24, 2014 at 8:28 pm

hai sir, i have been observing sensex n nifty for last 2years.. now im intersted about stock market.. im new to this world.. im sbi account holder.. sir, which precautions will make me in profit zone?? thans in advance

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68 Manish Chauhan September 21, 2014 at 12:48 pm

Its a vast area . You cant just take a tip and make money .

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69 Anand July 31, 2014 at 11:18 am

Hi Manish,

Really liked your post. Since, I am new to this, just want to know which bank/broker will be the best to open trading/demat account? Also, could you please let me know the steps involved in it?

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70 Manish Chauhan September 20, 2014 at 6:54 pm

Yes, you can do that .. I prefer ICICI direct. would you like our help in getting your ICICI demat opened . You can even invest in everything from there like shares, mutual funds etc ? We can help you on that, let me know

Manish

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