Cash Trading

AAA

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.

INVESTOPEDIA EXPLAINS '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

    1. Borrowed money that is used to purchase securities. This practice ...
  2. Margin Account

    A brokerage account in which the broker lends the customer cash ...
  3. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  4. Cash Account

    A regular brokerage account in which the customer is required ...
  5. Dividend

    A distribution of a portion of a company's earnings, decided ...
  6. Einhorn Effect

    The sharp drop in a publicly traded company’s share price that ...
RELATED FAQS
  1. How does the risk of investing in the electronics sector compare to the broader market?

    The risk of investing in the electronics sector closely approximates the risk of investing in the broader market. The electronics ... Read Full Answer >>
  2. How do markets account for systematic risk?

    Systematic risks provide markets with an unpleasant quandary. Economists, policy makers, directors, fund managers and investors ... Read Full Answer >>
  3. What stage of the economic cycle is usually the best for an investor to enter the ...

    The best time during the economic cycle for an investor to enter the electronics sector is when he has confidently identified ... Read Full Answer >>
  4. How do S&P 500 futures work?

    S&P 500 futures are a type of capital asset contract that provides a buyer the right to a predetermined selection of ... Read Full Answer >>
  5. Can I use the current yield to compare a bond to an equity investment?

    Investors should be careful when comparing the current yield on a debt security with the growth of an equity security. Yield ... Read Full Answer >>
  6. What types of stocks have a large difference between bid and ask prices?

    The bid-ask spread is the difference between the highest offered purchase price and the lowest offered sales price for a ... Read Full Answer >>
Related Articles
  1. Trading Strategies

    Introduction To Swing Trading

    This style, between day trading and trend trading, may be a good one for beginners to try.
  2. Investing Basics

    Principal Trading and Agency Trading

    Ever wonder what happens behind the scenes when you buy or sell a stock? Read on and find out!
  3. Options & Futures

    Losing To Win

    Adopting realistic expectations is essential to staying in the trading game.
  4. Active Trading Fundamentals

    An Introduction To Day Trading

    This article will take an objective look at day trading, who does it and how it is done.
  5. Options & Futures

    Direct Access Trading Systems

    DATs can dramatically speed up order execution - find out how this system gives novice traders an edge.
  6. Options & Futures

    Brokers and Online Trading

    How do you find the right broker for your investment needs? Start by reading our broker tutorial.
  7. Investing Basics

    What's the Primary Market?

    The primary markets are where investors can get first crack at a new security issuance.
  8. Investing Basics

    What is the Coupon?

    In the financial world, “coupon” represents the interest rate on a bond.
  9. Investing Basics

    Explaining the Coupon Rate

    Coupon rate is the stated interest rate on a fixed income security.
  10. Investing Basics

    What is Cyclical Stock?

    A cyclical stock is an equity security whose price is affected by ups and downs in the overall economy.

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center