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. Buying Power

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

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

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

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

    The funds that remain in a margin trading account that are available ...
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 an important ...
  2. Trading

    Pick the Right Brokerage Account for Options Trading

    Follow these steps to pick the right options brokerage account depending on your trading needs and style of trading.
  3. Trading

    Explaining Initial Margin

    Initial margin is the percentage of a stock’s price an investor must have in his account to buy that stock on margin.
  4. Trading

    Introduction to Margin Accounts

    Find out what your broker is doing with your securities when you invest on margin.
  5. Managing Wealth

    What's a Brokerage Account?

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

    Understanding Cash and Cash Equivalents

    Cash and cash equivalents are items that are either physical currency or liquid investments that can be immediately converted into cash.
  7. Investing

    Why Cash Management Is Key To Business Success

    Businesses need to generate a healthy cash flow to survive, but not hold too much so that inventory suffers or investment opportunities are missed.
  8. Trading

    Buying on Margin

    When an investor buys on margin, he or she pays a portion of the stock price – called the margin -- and borrows the rest from a stockbroker. The purchased stocks then serve as collateral for ...
  9. Investing

    Cash Flow Statement and Financial Health

    A cash flow statement records the amounts of cash and cash equivalents entering and leaving a company.
  10. Trading

    A Guide To Day Trading On Margin

    Buying on margin is a good option if you don't have the cash to day trade.
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 >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center