What is the difference between a margin and cash account for stock trading?
June 16th, 2008 | by Adam |
Jason asked:
I’m using E-Trade, what is the difference (in general if you wish) between a cash trading account and a margin trading account?
I’m using E-Trade, what is the difference (in general if you wish) between a cash trading account and a margin trading account?
5 Responses to “What is the difference between a margin and cash account for stock trading?”
By pagodaboy2001 on Jun 16, 2008 | Reply
Margin trading is when you borrow money (from a broker) to buy stock, the investment (stock) is held as collateral.
By brianpadley on Jun 19, 2008 | Reply
I believe trading on margin is borrowing money to trade. Trading on cash is using money that you invested in your account.
By betotron don on Jun 20, 2008 | Reply
margiin= buy with 50% of selling price as example
cash acct=buy with 100% of selling price as example
that be the difference
By mizzykizzy on Jun 20, 2008 | Reply
A cash account is where you pay for the Stocks with 100% cash.
A margin account is where you only put up a percentage of the purchase price of the stock (say 30%), if the stock goes down in price, you will have a “margin call” where you have to put more cash in to keep the leverage at 30%. It’s basically a way to try and make an investment without putting up all the cash, like buying a house with 20% down…
By Mark S on Jun 22, 2008 | Reply
The first two answers were correct, but one other difference is that with a cash account you have to keep in mind the settlement date. In a cash account you must wait three days after the sale of a stock before the money from that sale is available to make further purchases. In a margin account the money is available immediately after the sale.