A trading account is our capital that is available for use in trades on the online trading platform and the software you use to trade. Trading Book – A self-compiled journal for managing and following your trading activity, while writing down actions, thoughts, results, and anything which can improve your future trading.
What Is a Trading Account?
A trading account can be any investment account containing securities, cash, or other holdings. Most commonly, a trading account refers to a day trader’s primary account. These investors tend to buy and sell assets frequently, often within the same trading session, and their accounts are subject to special regulation as a result. The assets held in a trading account are separated from others that may be part of a long-term buy-and-hold strategy.
Basics of Trading Account
A trading account can hold securities, cash, and other investment vehicles just like any other brokerage account. The term can describe a wide range of accounts, including tax-deferred retirement accounts. In general, however, a trading account is distinguished from other investment accounts by the level of activity, the purpose of that activity, and the risk it involves. The activity in a trading account typically constitutes day trading. The Financial Industry Regulatory Authority (FINRA) defines a day trade as the purchase and sale of a security within the same day in a margin account. FINRA defines pattern day traders as investors who satisfy the following two criteria:
- Traders who make at least four-day trades (either buying and selling a stock or selling a stock sort and closing that short position within the same day) over a five-day week.
- Traders whose day-trading activity constitutes more than 6 percent of their total activity during that same week.
Brokerage firms can also identify clients as pattern day traders based on previous business or another reasonable conclusion. These firms will allow clients to open cash or margin accounts, but day traders typically choose margin for the trading accounts. FINRA enforces special margin requirements for investors it considers to be pattern-day traders.
Opening a trading account requires certain minimum personal information, including social security numbers and contact details. Your brokerage firm may have other requirements depending on the jurisdiction and its business details.