Cash Account
An account where every purchase is paid for in full, no borrowing.
What is Cash Account?
The default brokerage account type. No leverage, no shorting, and no borrowing against holdings. Trades must settle with available cash, and buying with unsettled funds can trigger a good-faith violation.
Cash Account: a worked example
$10,000 in a cash account buys exactly $10,000 of stock. Losses are limited to what you put in.
What is the difference between Cash Account and Margin?
Cash account = no leverage and no shorting. Margin account = both are available, plus interest costs and margin calls.
Often confused with Margin - see Cash Account vs Margin side by side.
More terms in Positions & Trade Mechanics
Long Position
You own the asset and profit when its price rises.
Short Position (Short Selling)
You borrow shares, sell them, and profit if the price falls.
Margin
Borrowing from your broker to buy securities, using the account as collateral.
Leverage
Using borrowed money to increase exposure relative to your own capital.
Initial Margin (Reg T)
The equity you must put up to open a margin position - generally 50%.
Maintenance Margin
The minimum equity percentage you must keep in a margin account.
Margin Call
A demand to add cash or securities after equity falls below maintenance.
Short Squeeze
Rising prices force short sellers to buy back, pushing prices higher still.