Types Of Online Trading Accounts

There are three basic types of online trading accounts involved with stock trading.

Each specific type has its own pros and cons.

Knowing the capabilities and limitations of each one is important and should be understood whether or not you will be opening them all or not.

In this section I will give a brief overview of each type. At the end of each overview, there will be a link to follow for more detailed information on a separate page of this website.

Online Trading Accounts

Cash Account

cash account pic
  • A Cash Account is one of the common types of trading accounts. With a "Cash trading account" you can use the total amount of money you have deposited in your account for buying stocks.

    Your purchasing power cannot exceed your available funds and your maximum losses are limited to your total account value (cash plus stocks owned). Read more about "Cash Trading Accounts" here:

Margin Account

  • A Margin Trading Account is the riskier of the three types of trading accounts. I'm not saying that a margin account should or should not be used, but you should know the risks involved with trading using margin.

    margin account pic
    Basically with a "Margin Trading Account" you can borrow money from your online brokerage firm to use on your behalf to place trades for buying stocks. Just like a loan from a bank or a credit card, you will be paying interest on the amount you borrow on margin for the time you are using the money.

    Keep in mind that the amount of interest you have to pay is small compared to the amount of profits you can make with a profitable trading system.

    There is a lot to know about using a "Margin Account". Read more about "Margin trading accounts" here.

Simulated or Virtual Trading Account

simulated trading pic

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