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Trading Account

Reviewed by Sujaini | Updated on Oct 05, 2020

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What is a Trading Account?

Any investment account which contains shares, cash, or other assets can be a trading account. The trading account most commonly refers to the main account of a day trader. Such investors tend to purchase and sell shares aggressively, often during the same trading session and their accounts are subject to special oversight as a result.

The assets kept in a trading account are segregated from those who may be part of a long-term strategy of buying and holding.

Basics of Trading Account

Like every other brokerage account, a trading account will hold shares, cash, and other investment vehicles. The term can represent a broad spectrum of accounts, including tax-deferred retirement accounts.

However, a trading account is generally distinguished from other investment accounts by activity level, the purpose of that activity, and the risk involved. The operation usually constitutes day trading in a trading account.

Brokerage firms may also classify customers as trend day traders based on previous company or other fair inference. These firms will enable clients to open cash or margin accounts, but day traders typically choose the trading accounts margins. FINRA enforces special margin conditions that it considers to be standard day traders for investors.

To open a trading account, certain minimum personal information, including social security number and contact details, is required. Based on the jurisdiction and its business details, your brokerage firm may have other requirements.

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