Process of Buying and Selling Shares through a Demat Account

For trading in equities in India, having a demat account is mandatory, as 100% of the stock settlement is done in the demat format. Since it is an electronic format, it is convenient to trade via demat account. New age stock brokers even allow you to open free demat account. Once your demat account is opened with a registered Depository Participant (DP), you can start trading in shares. While demat accounts provide one-click transactions, any unwanted click could result in faulty trading and even financial loss. So, becoming familiar with demat shares trading will give you a seamless trading experience.

The process of buying and selling shares through a demat account

Follow these steps to set up your demat account and start buying and selling shares.

1. Open a trading account.

Before undertaking any buying and selling of shares, opening a trading account is mandatory. Only then can you start trading via your share trading app in the stock exchange in India.

2. Become familiar with the trading account.

Before starting actual trading, you should become familiar with the user interface of your trading platform. Understand its key features and functionalities, like cover orders, market orders, and so on. Though online trading is user-friendly and works on one-click mode, you should browse through all buying and selling related pages and options, as any wrong click could lead to potential losses.

3. Be aware of the related charges.

Buying and selling shares via a demat account entails certain costs. Though some brokers offer a free demat account, there are other charges that you will incur in the process of trading in shares. For instance, brokerage charges differ across intraday and equity trades. This is because intraday trading involves trading shares on the same day. Likewise, equity trading involves selling shares you own after a certain amount of time. Also, brokerage charges differ between DPS (dividend per share) based on the services offered. Full-service brokers offer premium trading and services relating to investment but have higher costs compared to simple broking services provided by discount brokers.

4. Buy or sell 

Choose specific shares for buying or selling. You need to key in the transaction particulars accurately, including the quantity to be purchased or sold. Then, execute purchase or sale orders via the specific trading platform. When undertaking a buying transaction, ensure that you have sufficient funds in your registered bank account. Otherwise, the DP could restrict the transfer of shares in your account, owing to non-payment of dues.

5. Settlement

When you sell shares, the earnings are credited to your linked bank account and shares are debited from your demat account. When you buy shares, the demat account is credited and your linked account is debited.

In order to trade, you cannot transact through only a demat account—you also need a trading account. You also need a linked bank account to debit/credit the trade proceeds. Many retail investors open demat accounts, but may be unaware of the process of trading shares through a demat account. Therefore, it becomes imperative to understand how to buy and sell shares. For more information about buying and selling shares through a demat account, pay a visit to Dhan’s official website.