New traders need information. Many jump in and start trading without enough knowledge. That leads to strategic financial mistakes. Online brokerages offer many ways to learn about trading. They make information accessible to everyone.
To improve your trading experience, these are the basics of an important and misunderstood term.
What is a Trading Account
Because of the broad nature of the term ‘trading,’ it is used to describe different things, including tax-deferred accounts.
What distinguishes a trading account from a normal brokerage account is the volume and frequency of trade activity, the purpose of it, and the volatility and higher risk associated with these accounts. Trading accounts are designed for ‘day’ traders. While the account looks and acts like a regular brokerage account, traders purchase stocks, futures, forex, and complete both the purchase and sale of the asset, frequently in the same trading session.
The Trading Account is a day trader’s primary account. As a result, they are subject to special regulations. Assets held in a trading account are separated from those part of a longer-term buy and hold strategy.
Best Trading Accounts?
There are different account types. Each is based on trader knowledge level, assets traded, and personal preference. Here are our favorite accounts based on trading assets and platforms.
#1 Best For Options Trading: IQ Option
#2 Best For CFD Trading: Saxo Bank
#3 Best For Social/Copy Trading: eToro
#4 Best For Forex Trading: XM
1. IQ Option –
Min Deposit: $10
Assets available: 2.0
“RISK WARNING: YOUR CAPITAL MIGHT BE AT RISK”
2. Saxo Bank –
Min Deposit: $2000
Assets available: 4.9
69% of retail investor accounts lose money when trading CFDs with this provider.
3. eToro – Best Crypto Exchange for Beginners
Min Deposit: $50
Assets available: 4.8
Leveraged and speculative product. Not suitable for all investors. You should consider whether you can afford to take the high risk of losing your money. Capital is at risk.
4. XM –
Trading Account Regulations
The Financial Industry Regulation Authority (FINRA) defines day trades as the purchase and sale of an asset within the same day. Day traders are subject to specific rules and criteria:
- conduct at least 4 trades over a 5-day week
- ensure day-trading investment activity accounts for more than 6% of their total investment activity during the week.
Firms allow day trader customers to open margin or cash accounts. They rely on these margin accounts for their trading.
Trading Account Margins
FINRA enforces special margin requirements for day traders. Cash maintenance requirements for pattern day trading accounts are higher than those of non-pattern trading. The base requirements for margin investors are outlined in US Federal Reserve Board’s Regulation T. FINRA includes additional maintenance requirements for day traders in Rule 4210.
Day traders must maintain a base equity level of $25,000 or 25 percent of securities values, whichever is higher. Traders can purchase up to four times any excess over that minimum requirement. (Equity in non-trading accounts is not eligible for this calculation.) Traders failing to meet these requirements receive a margin call from their broker. Their trading is restricted if that margin call is not covered within five days.
Managed Forex Accounts
Managed forex accounts are used by investors to place their money in the hands of a different trader, trading on their behalf. This account is recommended for investors without either skill to trade on their own or time. Investors have several managed account options. We recommend Oak Valley Investments or Fibo group.
If you like this article, please consider reading our other reviews:
- Best forex broker
- Gold forex trading forecast
- eToro review
- Plus500 platform reviewed
- Olymp trade review and insights
- Avatrade full review
- IQ Option full review
- Social trading – what it is?
- Online trading platforms in India
- Online trading platforms for UAE
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.
Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.
Cryptoasset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro.
Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment, and you should not expect to be protected if something goes wrong. Take 2 minutes to learn more.