8 Replies to “Cash Account vs Margin Account – The Ultimate Guide”

  1. I like this way of money to be earned using this cash verse margin account. Gives you a break down how you can start account that allows you to start learning how to earn with small amounts of money you put in it. This has a lot of good information and catches your eye when reading the website. Has good content and helps others understand more what and how make your money grown in account like this.

  2. Thank you to give main strategies to get leverage in trading .I’m really interesting about starting trade,but I’ve some worries at all. Can you please add some mini video explaining more some ideas ?
    The way you explain is great,but curiously I would like to get more confidence when I have to sign and start my first session ,with low risk to lose my money
    Thank you !

    1. Hey and thanks for the feedback.

      I was actually thinking of adding video lessons to my articles in the near future. But for now, I only have written education. I just added some interactive quizzes at the end of the beginner and intermediate course. I hope that for now, you still can enjoy the education.

  3. Hi Louis,

    Can you please explain this part again? maybe with math:

    If a trader wants to use 200$ for 5 shares and then gets access to 1:2 leverage, it is not smart to use the entire 200$ to buy 10 shares instead. It is much better to scale down the money until it is the same amount of shares; so 100$ for 5 shares. Don’t increase position size, just decrease the price. Before entering think about a position size that you could do without margin and then do that with margin but for less money.

    Thank you!!

    1. Sure thing Maria.
      In that paragraph, I am trying to explain how to use leverage. Leverage allows you to trade with borrowed money. A 1 to 2 leverage would mean that you only have to pay $1 to control $2. So to buy one share of a $100 stock, you would only have to pay $50 with a leverage of 1 to 2.
      Most people that have access to such leverage use it the wrong way. They scale up their entire position size. Here is an example:
      XYZ is trading for $100 and you want to buy it. You have $10 000 in your account and you could buy 100 shares of XYZ. However, with a 1 to 2 leverage, you could buy 200 shares instead of only 100 shares. I recommend still only buying 100 shares though. The problem with buying 200 shares is that you thereby double your risk.
      I recommend using leverage to increase your overall buying power and not to increase the risk on a single position. If you have access to a 1 to 2 leverage but still only buy 100 shares, you could still use the other half of your account for other trading activities.
      In other words, don’t increase your risk just because you have access to leverage. Rather decrease the capital used per trade.
      I hope this makes sense. Otherwise, let me know.

  4. Louis this is a great explanation, I really was unclear about the 2 differences between a cash and margin account. I think as someone new to trading I think I’d prefer the lower risk of a cash account. Your comparison of the pros and cons was particularly helpful, thank you!

    However, a question, can you change your account type at a later date?

    1. Awesome to hear that my explanation could help you out. 

      Usually, brokers will require you to open a new account instead of changing your current account type. So often, you would have to allocate the money from your old account to the new account. But there are probably some brokers that allow you to change account type without having to create a new account.

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