Is Intraday Trading Possible Without a Demat Account?

Introduction

Suppose you wish to start stock trading. From what you have read about the requirements, you are pretty sure about the functioning of the Demat Account and Trading Account. But what's confusing is the kind of trading relation you want to step into and the account you require. You ask other investors in the market, and they say it's a must to have a Demat Account. Since you aim at intraday trading, ask the traders you know of; they say it's unnecessary. So, what should be done? First, let's understand what intraday trading is and what a Demat account is.

What is intraday trading?

Intraday trading refers to speculative trading in financial securities, such as buying and selling stocks before the market closes for the day. It's a type of short-term trading in which investors try to profit from price fluctuations in the stock market from hour to hour. This type of trading is done with stock futures and options (stock derivatives). It necessitates constant monitoring, tracking, and timeliness to make a stock purchase and sale decisions.

Additional Read: Features and benefits of a Demat Account

What is a  Demat Account?

A Demat Account works similar to a bank account. Like a bank account, a Demat account is where you keep your shares or securities. One of the essential requirements for buying and selling shares in the equity markets is a Demat or Dematerialized account.  A Demat Account is required to hold financial instruments in electronic form. Shares are purchased and stored in a Demat account during online trading, making it easier for users to trade. An individual's investments in shares, government securities, exchange-traded funds, bonds, and mutual funds are held in a Demat account.

Also Read: What is Demat Account, its Meaning, Type and Process

Is Demat Account Necessary For Intraday Trading?

A Demat Account is required if you want to hold shares or securities on a delivery basis. However, if you only plan to trade futures and options, a Demat Account is not required. There is no delivery of shares in intraday trading when dealing with futures and options. Instead, there is only a future option or obligation to buy or sell.

A Trading Account is sufficient because futures and options are settled in cash and do not require shares. An investor's Trading Account is the interface through which they buy and sell stocks in the stock market. The majority of Depository Participants (DP) waive account opening fees for Demat Accounts for investors who open Trading Accounts, irrespective of the nature of the trade. For the sake of convenience, you may choose to open both with the same DP in this case.

If you want to trade stocks, you must have a Demat Account on a Demat app. According to SEBI guidelines, having a Demat Account and a Trading Account is required when dealing in equities.

Additional Read: Dos and Don'ts for a Demat Account

Conclusion

Intraday trading necessitates traders to move quickly, know which stocks to choose, be aware of market trends, and have a risk appetite that allows them to absorb losses. For stock trading that is geared toward a medium or long-term investment, a Demat Account is required. It's easy to get the terms Demat Account and Trading Account mixed up. Keeping the points above in mind will help you to understand the situation better.

FAQs

   1.  Is Demat Account required for trading?

If you want to trade in equities, it is mandatory for you to have both a Trading and a Demat Account. This has been made compulsory by SEBI. However, if you plan to trade only in futures and options, then you don’t necessarily need a Demat Account. This is because there is no delivery of assets in derivative contracts.

   2. What happens if I don't trade with my Demat Account?

If you don’t trade with your Demat Account for a while, it will become dormat. Your broker or Depository Participant will hold your Demat Account till you reactivate it. You could have to pay reactivation fees and clear all your pending dues before you can transact using your Demat Account again.

   3 . How can I invest without Demat Account?

You cannot invest in equities without a Demat Account. The SEBI has made it mandatory to have a Demat Account to invest in equities because you need a place to store your shares electronically. Physical share certificates are no longer issued.

Disclaimer

ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470.  The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  Investments in securities market are subject to market risks, read all the related documents carefully before investing. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents are solely for informational and educational purpose.