Short answer: You buy and sell shares through a trading account, while a demat account holds the shares once you own them. A demat account stores your shares in electronic form but cannot place buy or sell orders on its own, so you need a trading account opened through a stockbroker, because only stock exchange members can trade directly.
Last reviewed: 12 November 2026
At a glance
| Term | What it does | Key point |
|---|---|---|
| Demat account | Holds your shares and other securities in electronic form | Cannot place buy or sell orders on its own |
| Trading account | The platform where you place buy and sell orders | Non-members must trade through one |
| Market order | Executes immediately at the current market price | You accept the current price rather than setting one |
| Limit order | Executes only when the stock reaches the price you specify | If the price is never reached, it does not execute |
| Stop-loss order | Exits or freezes a position at a set price | Used to limit losses from market fluctuations |
What does each account do?
A demat account, short for dematerialised account, is where your shares sit as electronic records instead of paper certificates. It is the storage part of the system. Your holdings appear there, and the account is what you look at to see what you own.
A trading account is the part you use to act. It is the platform through which you send buy and sell instructions to the market. Because stock exchange trading is restricted to members, who are stockbrokers, a person who is not a member has to trade through one. That is why you need both accounts, and why opening a demat account alone does not let you trade.
How do you place a buy or sell order?
Once both accounts are in place, you place an order on your trading platform. An order is an instruction that states which stock you want to trade, how many shares, and the type of order. The two main types are market orders and limit orders, and the choice between them changes what happens after you submit.
For a sale, the same platform carries the instruction in the opposite direction. The stock, quantity and order type still determine when and at what price the trade executes. Check every field before you confirm, because the platform acts on what you submit.
How do market and limit orders differ?
A market order executes immediately at the current market price. You get speed, but you do not control the exact price you receive. This is the simplest choice and suits cases where you prioritise execution over price.
A limit order executes only when the stock reaches the price you specify. Suppose a stock trades at Rs 500 and you place a limit order to buy at Rs 480. The order waits, and nothing happens unless the price falls to Rs 480. The catch is that the stock may never reach your price, and your order then stays unexecuted.
How can a stop-loss order limit losses?
A stop-loss order can be used to exit or freeze a position at a set price, which limits losses from market fluctuations. It is a tool for setting a level at which you want the position closed or frozen.
Consider this hypothetical example, with invented figures for illustration only. You hold 10 shares bought at Rs 500 each, a total of Rs 5,000. You set a stop-loss at Rs 450. If the price reaches Rs 450, the position exits, and the loss is 10 shares × Rs 50 = Rs 500. This example assumes the exit happens at exactly Rs 450 and ignores all charges, which would add to the cost.
Can you buy shares in an IPO or an unlisted company?
An initial public offering (IPO) is the first sale of a company’s shares to the public. To buy shares in an IPO, you need only a demat account, and allotted shares are credited automatically to that account. The trading account is not mentioned as a requirement for this route.
Shares of a company that is not yet listed cannot be bought in the secondary market. The secondary market is where shares already listed are bought and sold between investors. If a company has not listed, you cannot buy its shares there, regardless of whether you hold a demat account.
What are the catches?
Each order type trades one risk for another. A market order gives you speed but not price control. A limit order gives you price control but no guarantee of execution. A stop-loss order can cap losses at a chosen level, but the example above shows the cap is set by your chosen price, and it ignores charges.
Account structure also has limits. A demat account alone cannot trade, and unlisted shares cannot be bought in the secondary market. Knowing these limits before you open accounts or place orders prevents a common mistake: assuming the demat account is the place where trades happen.
Frequently asked questions
Can I buy shares using only a demat account?
No. A demat account holds your shares electronically but cannot place buy or sell orders on its own. You need a trading account, since only stock exchange members can trade directly.
What is the difference between a market order and a limit order?
A market order executes immediately at the current market price. A limit order executes only when the stock reaches the price you specify.
Can I buy shares of a company that is not yet listed?
Not in the secondary market. Shares of a company not yet listed cannot be bought there, though IPO allotments are credited automatically to your demat account.
What is a stop-loss order used for?
It can be used to exit or freeze a position at a set price. The purpose is to limit losses from market fluctuations.
Sources and last check
Facts in this article were checked against the sources below on 12 November 2026. Rules and figures can change; check the primary source before acting.
- icicidirect.com (broker education)
- upstox.com (broker education)
- kotakneo.com (broker education)
This article is general information, not investment advice. MyFinanceBandhu is not a SEBI-registered investment adviser.