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.

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RELATED FAQS
  1. What's the difference between a cash account and a margin account?

    Compare and contrast margin and cash accounts. Margin accounts offer short-term loans, leverage on existing portfolios, and ... Read Answer >>
  2. 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 >>
  3. How much can I borrow with a margin account?

    Understand the basics of margin accounts and buying on margin, including what amount investors can typically borrow for purchases ... Read Answer >>
  4. 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 >>
  5. 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 >>
  6. When looking at my online broker account, I see an account value, cash value and ...

    When looking at some online brokerage accounts, there are a few figures that may be confusing, including account value, cash ... Read Answer >>
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