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If you’ve put your trading activities on hold for a while, reactivating a dormant trading account may be on your agenda. Understanding the step-by-step procedure for reactivation is crucial to ensure a seamless return to the world of trading. Whether it’s been a short break or an extended hiatus, this guide will walk you through the process of reviving your dormant trading account and getting back into the dynamic realm of financial markets.
Table of Contents
Defining a Trading Account
A trading account is a financial platform provided by brokerage firms that enables investors to buy and sell various financial instruments in the stock market or other markets.
- It serves as a gateway for executing transactions, allowing users to place orders, monitor investments, and actively engage in trading activities.
- Linked to the investor’s bank account, the trading account facilitates the seamless transfer of funds for buying and selling securities.
- It plays a pivotal role in executing orders, and ensuring transactions are processed in the market efficiently.
- Additionally, trading accounts provide tools for risk management, enabling investors to set parameters like stop-loss orders to mitigate potential losses.
Difference Between Demat Account and Trading Account
While a Demat account is like a digital safe for storing your investments, a trading account is a tool that enables you to actively participate in the buying and selling of securities in the stock market. Both accounts work in tandem to facilitate a seamless and secure trading experience.
Nature of Accounts
- Demat Account: It serves as a repository for holding your financial securities in electronic format. The term ‘Demat’ stands for ‘Dematerialised’, indicating the conversion of physical share certificates into electronic form.
- Trading Account: This account is used for executing buy and sell orders in the stock market. It acts as an interface between your bank account and the stock exchange, facilitating the actual trading of securities.
Functionality
- Demat Account: Primarily, it holds and stores your investments, such as stocks, bonds, and mutual funds, in a paperless and electronic form.
- Trading Account: It enables you to place orders for buying or selling financial instruments in the stock market. It is linked to your Demat account for the seamless transfer of securities.
Usage
- Demat Account: Used for the safekeeping of your securities and for receiving credits when you purchase new securities.
- Trading Account: Used for executing trades, specifying the quantity and price at which you want to buy or sell securities.
Role in Trading
- Demat Account: While it holds your securities, it doesn’t facilitate the actual trading process.
- Trading Account: It is actively involved in the trading process, allowing you to place orders and participate in stock market transactions.
Associated Charges
- Demat Account: Charges are typically associated with the maintenance of the Demat account and transaction-related fees.
- Trading Account: Charges are related to brokerage fees, transaction charges, and other costs associated with buying and selling securities.
Reasons to Reactivate a Trading Account
- A trading account becomes inactive if no buying or selling of shares occurs through it.
- In compliance with guidelines, an inactive trading account is either deactivated or closed to prevent any transactions.
- Freezing trading accounts serves the primary purpose of ensuring their safety and preventing unauthorised activities, especially when traders take a break from trading.
- Dormant accounts can be exploited by fraudsters, leading to financial losses and legal repercussions for the account owner.
- Additionally, multiple inactive accounts may incur Annual Maintenance Charges (AMC).
Method to Reactivate a Trading Account
You can easily reactivate your trading by following simple steps. However, do remember that there will be certain charges that must be paid to make the trading account active.
- The first and foremost step to reactivate your account is completing the KYC process during which time you need to submit your Aadhaar card and PAN card along with the OTP that you will get on your registered mobile number.
- You can opt for an in-person verification to carry out the verification process. For this, you will have to choose a date and type.
- After the verification process, your broker will forward the request to the depository.
- After a few days, you can operate your trading account as a regular trading account.
- This applies to the Demat account as well. When the Demat account is idle for a particular time then, it is termed as the dormant account. A Demat account under your name is mandatory, as per the guidelines set by SEBI, to trade in the stock market. To avoid any fraud or scam by an individual, unused Demat accounting and trading are closed after a certain interval of time.
Conclusion
Reactivating a dormant trading account involves a straightforward process, typically initiated by contacting your broker and completing the required documentation. While dormant accounts may be reactivated, it is crucial to stay informed about the latest advancements in technology and the stock market. By joining platforms like Share India, which offer a wealth of features and insights, traders can not only reactivate their dormant accounts but also elevate their trading experience. Embracing the latest technology and gaining valuable experience through such platforms enhances users’ understanding of trading dynamics and opens up new opportunities in the world of finance. To embark on a journey of continuous learning and growth in the stock market, consider becoming a part of the Share India platform.