Cash Trading

DEFINITION of 'Cash Trading'

A method of buying or selling securities by providing the capital needed to fund the transaction without relying on the use of margin. Cash trading is achieved by using a cash account, which is a type of brokerage account that requires the investor to pay for securities within two days from when the purchase is made.

BREAKING DOWN 'Cash Trading'

Cash trading is unlike margin trading because the account holder cannot borrow money from the broker to fund the transaction. Cash trading involves less risk than margin trading, because risk is limited to only the cash invested.

RELATED TERMS
  1. Buying Power

    The money an investor has available to buy securities. In a margin ...
  2. Initial Margin

    The percentage of the purchase price of securities (that can ...
  3. Cash Account

    A regular brokerage account in which the customer is required ...
  4. Regulation T - Reg T

    The Federal Reserve Board regulation that governs customer cash ...
  5. Trading Margin Excess

    The funds that remain in a margin trading account that are available ...
  6. Minimum Margin

    The initial amount required to be deposited in a margin account ...
Related Articles
  1. Trading

    Simulator How-To Guide: Margin Accounts

    Although we've used virtual cash so far in our How-To Guide, we've dealt with investing from the perspective of an investor trading stock with his/her own money. However, there's ...
  2. Trading

    Intermediate Guide To E-Mini Futures Contracts - Margin

    Margin is essentially a loan that a brokerage firm extends to a client (the trader or investor) that is used for the purchase of trading instruments. Margin trading allows traders and investors ...
  3. Trading

    Margin Trading: Conclusion

    Here's the bottom line on margin trading: You are more likely to lose lots of money (or make lots of money) when you invest on margin. Now let's recap other key points in this tutorial: ...
  4. Managing Wealth

    What's a Brokerage Account?

    A brokerage account is a contractual arrangement between an investor and a licensed securities broker or brokerage.
  5. Investing

    Brokers and Online Trading: Accounts And Orders

    Types of Accounts Depending on what type of securities you hold, there are four major choices you have when opening an account: Cash Account: The basic account where you deposit cash to buy ...
  6. Investing

    Analyze Cash Flow The Easy Way

    Cash flow statements reveal how a company spends its money and where that money comes from.
  7. Markets

    What is the Cash Ratio?

    The cash ratio is the ratio of a company's total cash and cash equivalents to its current liabilities.
  8. Investing

    Operating Cash Flow: Better Than Net Income?

    Differences between accrual accounting and cash flows show why net income is easier to manipulate.
  9. Investing

    Analyze Cash Flow The Easy Way

    Find out how to analyze the way a company spends its money to determine whether there will be any money left for investors.
  10. Retirement

    Why Cash is King When Markets are Volatile

    After the past several years, you might be addicted to equity. But when markets turn volatile, cash is the best option. Here's why.
RELATED FAQS
  1. What does it mean when the shares in my account have been liquidated?

    An account liquidation occurs when the holdings of an account are sold off by the firm in which the account was created. ... Read Answer >>
  2. Where do companies keep their cash?

    If you have ever looked over a company's balance sheet, you have no doubt noticed the first account under the current asset ... Read Answer >>
  3. What is the interest rate offered on a typical margin account?

    Learn about the basics of trading on margin accounts, specifically the rate of interest that is typically charged for margin ... Read Answer >>
  4. What is the difference between initial margin and maintenance margin?

    Learn the difference between an initial margin requirement and a maintenance margin requirement and how these affect an investor's ... Read Answer >>
  5. What does it mean when I get a Fed margin call?

    Learn what a fed margin call is, what it means when you receive one and what steps you must take to satisfy the fed's requirements ... Read Answer >>
  6. How does margin trading in the forex market work?

    When an investor uses a margin account, he or she is essentially borrowing to increase the possible return on investment. ... Read Answer >>
Hot Definitions
  1. Put Option

    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  5. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  6. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
Trading Center