Account Types
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A trading account is the account structure through which we hold capital and access the services offered by a broker. The exact account types vary by broker and jurisdiction.
Common Distinctions
- Cash account: trading is generally limited by available cash and does not use broker-provided margin in the same way as a margin account.
- Margin account: may allow borrowing or leveraged exposure under defined rules.
- Individual vs. joint accounts: define who owns and controls the account.
- Retail vs. professional classification: can affect available products, leverage, and regulatory protections depending on jurisdiction.
The name of an account type is not enough to understand its risk. We must examine the actual terms, eligible instruments, margin requirements, fees, and protections.
Key Terms
Cash account, margin account, leverage, margin requirement, retail client, professional client.
Knowledge Check
- What is a trading account?
- What is a basic difference between cash and margin accounts?
- Why should we read the actual account terms instead of relying only on the account name?
