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. Margin Account

    A brokerage account in which the broker lends the customer cash ...
  2. Cash Account

    A regular brokerage account in which the customer is required ...
  3. Debit Balance

    In a margin account, money owed by the customer to the broker ...
  4. Minimum Margin

    The initial amount required to be deposited in a margin account ...
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    A company's total cash minus total liabilities when discussing ...
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    A period of time in which an investor’s securities are prevented ...
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RELATED FAQS
  1. How exactly does buying on margin work and why is it controversial?

    Learn how purchasing stock on margin works, and understand the risk associated with margin accounts that make the strategy ... Read Answer >>
  2. 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 >>
  3. What happens if I cannot pay a margin call?

    Minimum margin is the amount of funds that must be deposited with a broker by a margin account customer. With a margin account, ... Read Answer >>
  4. 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 >>
  5. What does it mean when I get a maintenance margin call?

    Understand how maintenance margin calls work, and learn about how margin requirements are different for trading stock versus ... Read Answer >>
  6. 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 >>
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