You can trade online only if you have an online demat and trading account. The shares are stored electronically in demat account. The demat account is used to store the shares and the trading account is used for trading.
To open a online demat and a trading account you need to approach a depository participant (DP). The depository participants are banks, brokers and financial institution.
The DP will issue an account opening form. You have fill the form and submit it with the required documents. You also have to submit the physical shares. The DP will open the account and give the account number to you. The DP will also update your account. The account number is also called the Beneficiary Owner Identification Number (BO ID). The physical shares are defaced once they are converted to the electronic form. The account is available to you in a few days. This is the process you have to follow to open a online trading account.
There are two depositories in India CDSL and NSDL. the list of depository participants is available at the two websites. The demat accounts are maintained by the depositories.
Benefits of trading online
- Once you have an online trading account you can trade online. The benefits of trading online are
- The shares are stored electronically and so there is no threat of theft and you do not have to store the shares physically.
- Online trading leads to paperless work. You can easily buy or sell shares.
- It leads to lower transaction cost
- The transactions can be done with speed
- You can use high-end tool available online for online trading
- You can access your account anytime anywhere using the internet
- You can trade using a single account in multiple markets
You can open the account with any online broker. The online broker offers the trading platform for you to trade online. You should check the if the platform is user friendly and easy to use. Check if the platform is internet based so that you can use it anywhere. The best online trading sites offer good internet based trading platforms.
You should also check the charges. The charges for an online account are account opening fees, maintenance fees, custodian fees, transaction fees and dematerialization fees.
The depositories does not charge the investors but charges the depository participant. The DPs are allowed to have their own fee structure for their clients. In online trading India different online brokers charge differently.