Margin Account vs Cash Account: Which is right for you?

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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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*Tim Bohen teaches skills others have used to make money. Most who receive free or paid content will make little or no money because they will not apply the skills being taught. Any results displayed may be exceptional. We do not guarantee any outcome regarding your earnings or income as the factors that impact such results are numerous and uncontrollable.

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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!

Stockstotrade
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hard to find such people like Tim explaining complicated things in an easy way for begginers. Thank you

gc
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I feel better now knowing the difference and understanding the meaning between both what margin is and what cash is

Therealericjones
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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!

Sheranserwan
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never knew a margin account could be a friend. thx Tim for letting us know that

leonardomaldonado
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Using cash account with interactive brokers

ryanpeterson
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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.

gracefire
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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.

havapo
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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.

Sthngtn
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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.

invstyer
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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.

uphillbattle
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Thank you for video, it helped me to choose right account.

palsingh
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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.

QuainandJennylis
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I trade Cash in my personal account...
But in my 401k I have limited margin account, no shorting..big thanks Tim... Keepem coming

bobbydulin
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I have a cash account, and thank you very much for clearing this up!!

waynehanson
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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

tbatba
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I do not use any accaunt, for now I only study I look at the market and analyze the pattern.

oinotnairamida
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you answered all my questions i had about this topic. Thank you a lot! great job!

filipmlaen
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You have such a great channel Tim. Thanks for all your videos.

aaronpullano
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Tradestation=margin option level3 Etrade=cash account

bernardduffy