How are Demat Accounts Useful in Commodity Trading?

How are Demat Accounts Useful in Commodity Trading?

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A Demat Account is like  a bank account. In the same way that bank accounts keep money electronically, Demat accounts can hold your  shares in  digital format. It simplifies owning investments such as stocks, bonds, government bonds, mutual funds, investments, insurance, and ETFs and more, in reality the Demat account helps  to reduce the difficulties of physically managing and holding shares. According to SEBI, we can  trade in the stock market through a Demat account. The aim and objectives of Demat account. Is to you store  securities, buying and selling  gets reflected in the account. All the buying and selling happens through a Demat account. 

What is commodity trading?

A commodity market is a market where  traders  trade in steel, coal and other raw materials. There is also other market such as currency markets which trade in different currencies. But the derivatives contract is depends upon different raw material. To trade in the commoditive market you need to use the derivative contracts. However, this type of trading is widely done by the professional trader in the stock market.

The derivative is simply means of a contract which value depends upon its underlying assets. The value of these contracts fluctuates as the the underlying asset. The underlying asset could be stocks, bonds, commodity or other financial instruments. This is an high volume trade occur in the derivative where mostly the  experience trader can venture into this market. The Derivative is also use for hedging as the functionality of this trading is quite different. There are different type of contract available in the stock market.

Demat account is use to store the equity derivatives into your Demat account. You should link your Demat account and trading account  as it is a better way to keep tab on your trading activity. 

To know more about Demat account we can look at the following 

Some of the feature of an Demat account are as follow:

Convert your financial certificates

If an investor has physical certificates, they must submit their financial instrument to the depository participant (DP) for them to be converted to electronic form.

So  if an  investors owns a digital financial  certificates, they may quickly convert them to physical form by requesting their brokerage firm.

Freezing Demat accounts

The holder of a Demat Account can freeze their holdings in their Demat account. Trader or investor can also can freeze their Demat account for a certain time period. By freezing, shares will be prevented from being transferred from any Credit or Debit activity to the other  Demat account.

Lower cost

Physical certificates used to come with a  extra fees, includes the  processing fees, stamp duty, and various other charges. A trader does not need additional charges with online Demat accounts.  By doing online trading you get It better results and decreases the cost of owning and selling  stock in in the stock market.

Lesser risk

There was always a serious risk in trading but we can skip the risk such as the  loss, theft, forgery, or mutilation with physical share certificates. But with the use of Demat accounts, these risks can be eliminated.

Faster transaction

Before introducing Demat accounts in the stock market, it would take one or two days to settle a single transaction of share  in the stock market. However, using a Demat account, a user may now purchase or sell daily, and the transaction is resolved instantaneously and you can do a hassle free trading.

Easy loans

One more reason for opening a Demat account is that the securities held in a Demat account can use as a collateral for obtaining loans from  banks or other financial instrument. So having a good number of financial product you have better chance of getting loans from the bank or any other financial institutions.

Simple transfer

With the use of an online Demat account, any user can conveniently transfer their shares with less time. As a result, using the Demat account simplifies and expedites the entire procedure of buying and sharing the financial assets.

Conclusion

Just like other financial method, the derivative trading has the advantages and disadvantages, and it is use to grasp the possible rewards and cut down the risk as possible. So if you know how to trade in commodity trading.

An commodity trade provide you  flexibility and liquidity. Compared to other investment opportunities, you may get less risky investment. Commodity can guard against downside risk and diversify your portfolio. A skilled derivative trader may better money from using different commodity trading.

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