A demat account is an online trading account that allows buying and selling of shares of a company on stock markets in India. It can be opened without identification, but with email and phone number. The notion behind a demat account is that it helps those who don’t have enough money to buy shares from the primary market or trade on the secondary market.
A demat account holder can use these accounts to establish his/her position in the share industry, making trades through brokers and dealing directly with companies such as banks, mutual funds, insurance firms and other stock market players. This model provides many benefits to companies like lower transaction costs, quick liquidity at all times and access to millions of potential investors across India.
But, how many Demat account one can have? Here, we are going to talk about the maximum number of Demat accounts one can have in different exchanges. This is because some depository participants have put a limit on how many accounts they will support.
Know the rules first
One should also read their terms carefully before opting for that service provider to find out if a whole new account will be created for you in case you do not already have a position on that exchange and aren’t going to follow the rule.
You should also use an international bank debit card that does not charge any additional fees for withdrawing Fiat from your online trading accounts.
Why a demat account is ideal
- Having a Demat account can improve your trading strategy as you can stratify your trading objectives and design a systematic approach towards choosing the right assets for trading purposes.
- Also, by using DEMAT, you can trade across multiple instruments in one account. So if you want to trade derivatives say Futures or Stocks, it is possible with DEMAT.
So, can one have many demat account? Yes. You can have more than one demat account provided that you don’t open with the same DP.
Why having many Demat accounts is essential for a trader
The idea behind having more than one Demat account for trading is to buy/sell assets in one account at a better price compared with another.
Suppose you have two accounts and trade both of them. So if you are trading on the same pair the prices might vary significantly.
If you trade only one of them, it’s difficult to monitor your profits and losses due to a lack of information about what is happening in your other account; thus resulting in short-term trading decisions. This will lead to this discrepancy in your trade results.
However, if you have multiple Demat accounts and trade them simultaneously on the same asset, you will be able to monitor your trades.
So you can easily understand whether you are trading in profit or loss. This will help you to make long-term trading decisions and reduce your risks in the financial market.
You can also place buy orders at different prices on different accounts, which is called front-running in traditional finance. Front-running refers to the act of one party taking advantage of advanced knowledge of forthcoming market-moving information. Front-running occurs in securities, commodities, derivatives, foreign exchange, and futures markets where there is a conflict of interest between the firm providing the research and investment advice (the research firm) and its customers.
Since most brokers offer varying spreads in Demat accounts opened by the same account holder in different securities, one can open more than one account to benefit from these spreads by trading on different accounts using different criteria for choosing stocks, etc.
In conclusion, someone can have up to 20 Demat accounts but with different depository participants if they have all the other necessary documents.