Margin Account vs Cash Account: Which is right for you?
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- Опубликовано: 8 июл 2024
- Do you have a margin account or a cash account? Tim Bohen is covering the pros and cons of each kind to help you decide which is best for you.
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Cash accounts allow you to trade with the amount of money you put into your brokerage account. For example, if you put $1000 in a cash account, your buying power is $1000. A major benefit of using a cash account is that it frees traders from the pattern day trader (PDT) rule.
If you have a cash account, you are not limited to three trades in a rolling five-day period like you are with a margin account. However, most brokers have different settlement periods so they may not settle your cash for a few days.
Most day traders use a margin account because it allows you to buy more stock than you can afford with the cash in your account. Margin accounts also allow traders to short sell.
Different brokers offer different loan leverages for margin accounts. Many brokers will have 2:1, 3:1, or 4:1 leverage. If you're using a broker that's giving you more than 4:1 leverage, you might wanna be cautious using that broker.
For example, if you've got 4:1 leverage, you can buy 4,000 chairs of a $1 stock with only $1,000 in your account. It’s tempting to be able to trade way bigger positions with a margin account.
But remember, margin is a double-sided blade. Margin accounts magnify winners, but it magnifies losers as well. Margin accounts are highly recommended to day traders, especially if you're looking to short and trade momentum stocks.
Always have a trade plan, and cut your losses quickly.
#StocksToTrade #MarginAccount #CashAccount
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Do you use a cash account or a margin? Just real quick, comment cash or margin. I want to know what most of you are using!
Cash account
Cash money baby!
cash account with etrade
Cash
Is stt broker intergrated?
hard to find such people like Tim explaining complicated things in an easy way for begginers. Thank you
I feel better now knowing the difference and understanding the meaning between both what margin is and what cash is
never knew a margin account could be a friend. thx Tim for letting us know that
or can be a foe (opponent)
Once again, thanks for the great guidance Tim. Always a pleasure.
Thanks Bohen!
Great explanation! Thank you.
I trade Cash in my personal account...
But in my 401k I have limited margin account, no shorting..big thanks Tim... Keepem coming
This is quickly becoming my new favorite RUclips channel
Thanks for the help! I was struggling to staying above the PDT rule. Decided to change to a cash account because I do not necessarily trade every day.
I am lucky I found this channel as a new trader, thanks man !
Awesome video! Thanks for the help!
Thank you for explaining this!
Yeahhh 👌🏾
Excellent video and very high quality. Liked and subscribed. Thank you for the information.
Great clarification! You're better than hundreds of customer service representatives who I talked to them and they couldn't`t clarify the margin and cash accounts as you did!
Appreciate it!!
Using cash account with interactive brokers
How much u need to spx short call in interactive brokers???
Wow this was very insightful I've been confused about how margin works exactly and you broke it down to a T. I feel more comfortable starting my margin account now. Also I never knew that the reason why I've never been able to short or sell puts is because I'm working off of a cash account. Thanks some great info there. Thank you
Thank you for explaining this so simply.
You have such a great channel Tim. Thanks for all your videos.
Thanks for the support!
I have a cash account, and thank you very much for clearing this up!!
Wayne Hanson how do i open a cash account whats ur broker
you answered all my questions i had about this topic. Thank you a lot! great job!
Glad it was helpful!
thank you that was helpful!
Thank you for explaining the difference! I'll probably start cash ♡
I'm going to start with a cash account and then move onto a margin account if I ever end up shorting. I feel like this is a good safe start.
Margin every trade is made with a trailing stop loss, long and short has been very profitable over the last couple of months to the tune of tripling my account, as you mentioned cutting your losses early and having a plan that lets your winners run is key, no plan equals no money left in a very short period of time
hi, what about the limit of 3 trades limit in 5 days?? , it is too litlle..
we could trade just 3 times in a week with margin account???
super helpful, thank you
Great Explaination!
Appreciate the direction and deep knowledge 💯 🙏 👌.
Thank you!!
I'm using mine as a cash account. I just learned that the PDT rule doesn't apply to cash accounts, and wow, pretty glad to hear that! I never trade my full cash amount, because I'm on the cautious side...I only trade what I think I won't hate losing, although honestly, I would hate losing anything! It's less important to earn fast for me, and more important to learn and apply what I'm learning as I go. I'm pretty sure I won't be anyone's "next" millionaire! I don't doubt I'll get there eventually, because I find this very interesting and fun. That's always guaranteed to keep my interest, in anything. But...I just won't be next. Not right now, anyway. Oh, shoot! Edited to add thank you, Tim, for another great video.
Glad you're learning!!
Cash. Sykes made his 1st million going long and I'd rather get really good at going long before shorting which is marked as advanced in The Complete Penny Stock Course. Also I'll never use leverage.
Cash. Limits with capital, no shorts, but if the trade goes south I'm not "wasting" day trades. Totally worth it to me. The ability to get out of trades and more importantly having the ability to size in and scale out is far worth being limited with cap.
So if you have a loss on a trade and you sell do you still have to wait for your funds to settle again even if you took a loss?
hi, what about the limit of 3 trades limit in 5 days?? , it is too litlle..
we could trade just 3 times in a week with margin account???
You absolutely answered my question. I’m opening an account with Merill for retirement mostly
A couple of questions.
1)Since margin is essentially a loan, are there interest fees on that loan even if you close the position before the end of the day?
2) If I choose to get a margin account solely for the purpose of keeping my money from being tied up during the settlement period, does the margin automatically get applied to every purchase or can I choose not to use the available leverage?
Btw, I currently use a paper account.
Thank you for video , it helped me to choose right account.
Awesome! You're welcome
Hi Tim, great video as usual. I have a Scheab Cash Brokerage Account. Apaet from oit being comission free, Schwab requires 2 days for a trade to settle. What I do to trade everyday is to use half of my account total each day. For example, if my account is $8K on Sunday, and my "settled" funds are also the $8K, on Monday I will only use $4K of the $8K. This enables me to still trade on Tuesdaywith the remaining$4K of the $8K. On Wednesday, the $4K I used on Monday, plus whatever gain or loss on Monday, has settled and I can use that $4K from Monday again now on Wednesday. The same applies to the $4K I used on Tueday, those funds settle and are available Thursday. In turn and lastly, Fridays settled funds are from the funds I used Wednesday. Hopefully this helps. It works for me and Schwab doesn't get to make money off of me.
Amazing how I clicked off about ten youtube videos before yours cos of whispering voices. Clear voice in your channel is catching.
I think long bias traders would go for a cash account, and short bias/leverage traders would go for a margin.
When I opened my Webull account, I did not know what a margin account was. So glad I went with it. Even though I never trade more than the cash I have in the account.
I do not use any accaunt, for now I only study I look at the market and analyze the pattern.
Oinotna Iramida did you start trading by now and how is your experience?
Thank you for helping me take a decision. I will start with a cash account once im done with paper trading.
I use both
I like the "cut's both ways" reference - just made $2200 trading today so i'm feeling good. Keep up the good work. i think you could've elaborated a bit more about the cash accounts not abiding by the pattern day trade rule with a few examples of how to circumvent it though.
So is margin better or cash
I think the biggest benefit is the no-settlement when using Margin. You can buy and sell back and forth all day long without having to wait the 1-3 days as you do in a cash account. This point is often overlooked and is the reason I love margin. Also, as long as you have 25K in a margin account you are not subject to the PDT rule. Both good points to add to this video.
so when u have to wait 1-3 days is that how long for cash to settle for wins and losses or do i have to wait 1-3 days after every trade like i buy 10k worth of a stock but i sell instantly for some reason do i have to wait 1-3 day to get my 10k right back? or is the 1-3 days just for loses and gains
Thanks for all the great video's, Working on increasing my knowledge account before I get started.. I'd prefer to lean towards a cash account but wouldn't mind trading every day though.. Are their any loop holes to do this? I'm curious because swing trades don't always work with penny stocks and I'd prefer to get in and get out like a sniper while still staying long for now.. Much love to all of you at Stocks to Trade and Tim Sykes!
Nice explanation video! Thanks for sharing knowledge.
2 things to make the production better :
Its night and the white backround screen is hurting the eyes.
There's a lot of reverb and also a buzzing sound throughout the video
Good explanation.
Glad it was helpful!
I use both.
Glad I found this video, looking into webull and I didn't know the difference...as a newbie a cash account seems like the way to go
Glad it was helpful!
Cash, I am about 2 years into and still very new into trading. watching your pre market everyday. learning how to start swing trading as i had been doing only day trades small and only a few as i am still on the PDT rule
Hi, I'm about to start long terminvestment and I'm in the process of opening an account. For Now, I just want to put money in index funds. Should I go for cash?
Cash account with IBKR. Best option for beginners!
Both
Thanks for the helpful information mate, so is marginloan good for long term growth stocks too?
Margin and Cash!! I just transfer to the cash account after I've used my 3 trades in the Margin account.
Cash account so I am not limited by the PDT rule. At this point I am learning and growing a small account. Once I am more consistent and/or I want to learn about shorting I will likely use a margin account. I am not in a hurry. I trade now to learn and build a skill, not to "get rich quick"
I’ve had a margin account on Robinhood for several years of Buy and Hold. I love it for instant funding from my checking account and instant proceeds from sales (and never used it for leverage). I just opened a cash account with TD Ameritrade to get around the Pattern Day Trading law and I hate the 3 day delay in funding (especially because it’s coming out of a TD Bank account). I also hate waiting 3 days before I can re-invest the proceeds from any stock sales. I’ll probably convert it to a margin account and limit myself to 6 day trades per week max (3 on each account) and concentrate on Swing Trades.
Thanks Bro, you make it so clear. I about to open an account on Webull but dont know which one such works for me. one question if I dont want to use the margin leverage I dont have to right?
I have a cash account to get around the PDT rule. I keep extra money in my account that I do not use unless an equivalent amount is returning to my account, to give me a little more freedom trading. but it's unfortunate I can't short. When I make enough to get away from the PDT rule I plan to switch to margin.
So excited to upgrade to margin
for me as a newbie I'll stick to cash account till I build it up to over 25,000 then switch to margin so I can trade more often than fear PDT strikes against me LOL ..good video
Have you switched yet ?
from what i learned in this video it doesn't matter how much money you have in cash. If you have a 3-1 margin account and with your 25k you buy 75K 1$ shares you need to cut your losses before the share reach 0.66% of its original value. If it reach 0.66% you will lose your 25k so from my perspective its even worst to put more money in there unless you know what you are doing. But I get your point. You probably want to use that time to learn and use that experience so when you'll have 25k you'll be more confident.
There is something not usually covered when talking about Margin/Cash account differences: Margin also implies a margin rate (fees), so you will have to pay a monthly amount for that leverage.
Is this even if you don’t borrow more than your cash amount?
@@moonlightnewbie6599 No fees in margin accounts just to have one or if you only use your actual cash in the margin account. Once you borrow money using margin money from your broker to buy then the amount borrowed is charged a fee.
thank you
you bet!
That's very informative, thanks. I have some questions here.
1. Can I have both cash and margin acc at the same time?
2. Or if I open a cash acc first, after being comfortable then switch to a margin acc?
3. Or if I open one of the acc with money parking there. But haven't started to trade, says one or two weeks. Will I have any fee involve like maintaining fee or so?
Thanks
cash, would love to start shorting though.
Just buy puts
Tim, with a cash account if you're good with your money you can have £1500 in your account and use half to trade in a Monday. Use the other half to trade in Tuesday and then by Wednesday Monday's money will be available. On Thursday Tuesday's money will be available and so on ...
good, but he says you can't do day trading stocks with cash account, that's a huge problem.
and the limit of 3 trade in a week is nonsense with margin account🤦🤦
Better video than what I've seen so far. I wished you had gone further in your example. What happens when your "1$" stock drops below what level ? Your broker automatically closes positions, in which order, etc... And Overnight fees... can't talk about margin accounts and not mention that.
not yet
I just opened an account on CMEG. I’ve been practicing a demo mode for about 3 months and typically get about 15% a week and I’m going to use a margin with $1,600
Awesome!
Cash account, great video. :)
THAT'S why I've never come across the Pattern Day Trade rule. I'm cash and have a 2-3 day settlement period. 3 months in every. Single. Day and I'm up $749 YTD thanks to the Tims!
Barry W can you explain what is 2-3 day settlement?
@@jhonnyarvilla4687 Sure! I'm a newbie, so maybe I'm using the wrong terminology. If I make a Full trade on Monday, those funds won't settle until Thursday morning. Now, I CAN reinvest those funds before Thursday but I messed up once and traded on unsettled funds one too many times and E-Trade took away my sweep account for 90 days. I had to wait for funds to settle before making a trade, which ended up being good because it forced me to take more time and layout my plan better before trading. Maybe trading on unsettled funds would be a good topic for an upcoming video?. Hope that provides clarity.
Barry W thank you for explain this to me very helpful
I use my cash account for long trades. With my account size and position sizes I usually end up with being able to do about 8 trades a week. I rarely do that many though. It's T+2 so when I buy and sell Monday those funds are available again Wednesday morning. Don't trade with the unsettled funds with a cash account or you'll get a good faith violation. It's similar to PDT you'll get a 90 day
Restriction if you do it 4 times in a year. I'm a little unsure on what exactly the restriction is. Never been restricted, but I have gotten a couple good faith violations. Just use them wisely if you're going to take one. Make it on a trade that's worth it and don't do more than 3.
James Scott Thank you very good explanation as well right now I took a step behind because I felt I was more gambling than trading and that is not a good sign to be a successful trader I’m here for the long run so I’m reading a couple books all related with Timothy Sykes my inspiration trader and when I’m done I will get back on the action thanks again for the verification
I’m trying to figure out which account I’m trying to use for a beginner
i hope you understood, my point to make many trades aday ( sell and buy many times , but using my money ) i need the margin to trade many times during day
Thanks Tim ..... all clear, I have a question ....
how does paper trader work in stock to trade? Do you need a full subscription or are the costs different? Thanks Tim
Paper trade is a good way to practice but not real money
I have 2.2.2.3 day's trade..I have a feeling that I'm doing something wrong..because I like to buy and sell. Not just hold on to it
wow that was so engaging! my all notification sub is yours!
Cash account was very useful in the beginning, but after thirteen months - margin was the way to go.
Margin, avoids forcing me to trade with settled funds only.
i cant seem to trade because my settled cash is 00.00 but i have 1000 buying power , could you help with this ?
@@randylep you have to wait two days after you trade.
@@siershoots3565 yea switched to IG thanks tho
Is Tradier under STT a cash or margin account?? Are you able to short with Tradier?
so we can still daytrade with cash account on interactive brokers? As long as we dont use our unsettled funds right?
you only dip into that leverage if you spend over your buying power correct?
Hi guys! I just wanted to ask you guys about margin account, because i want to do short selling but I don’t really want to borrow money. So for example I have a margin account with $2,000 in it and short a stock worth $1,000, does it mean that I didn’t use the margin? Or is it different in short selling, that I’m required to borrow money? Thank you!
I'm new to trading at TD America ---I sold some mutual funds -they did a cash sweep. It appears I ended up in a bank account earning interest but still shows funds available for trade. will I be taxed on this account?
Do you have a video teaching/talking more about the PDT rule?
Not on this channel yet. However, check out the SteadyTrade podcast where Tim Bohen and Stephen Johnson cover the PDT rule! ruclips.net/video/rsMgOi7AraQ/видео.html
Only using cash in Margin avoids those Runes PDT
Cash, but using a margin account would be much better -- e.g. leveraged positions, short-selling, more options, etc
with cash account i cant sell a stock in a day trading, and with margin account a can't trade more than 3 times in a week??
is that true??
Thanks for the info Tim. My Question : Can I buy a vertical call or put with a cash account?
🙌👏
Hello,
Can we trade options on td cash account ?
Thanks
I made both started with cash account
Awesome!
do you guys use more then one broker at a time?
In cash account can i make options spread with defined risk???
i legit like this.
I need strategy of cash and margin in the same time
I don’t know which one I should use
Cash account webull. Just curious now i can buy then sell in 3 days if i want correct? Or do I have to hold longer? Thank You to whoever can help me out...Just so I'm 100% sure I'm not doing wrong.....Good video subbed
Always use leverage\margin. As long as you're strict. Keep a small cash acct to avoid pdt unless you're over it.
Can a cash account go negative? or will the broker just stop you out?
Cash but will eventually be using margin near future
This video is about to tell me which account I'm about to open.
Do you have a limit of trades if you never run out of money with margin acct?
Cash
cash management vs got both margin too saving trade