The trading account is opened with a bank or other financial institution and is usually managed by an investment trader. While stocks have traditionally been the most common financial instrument held in trading accounts, cash can also be held, including foreign denominations and other financial instruments such as bonds, options, commodities, futures, and derivatives.

Trading involves buying and selling financial instruments frequently with the aim of generating returns that exceed the buying and holding strategy, which is a fairly common strategy when it comes to investing. Trading profits are usually made by buying at a low price and selling at a higher price after a short period of time. Trading profits can also be made by selling at a high price and buying at a lower price to cover the position. This is known as a "sell short" strategy, which is executed in a falling market.

Functions of a trading account
Both individuals and companies can open trading accounts and deposit a certain amount of money for the execution of trading transactions. The minimum deposit amount is usually set by the financial institution and sometimes even by state law.

While trading accounts are usually considered for shorter term transactions than investment accounts with a broker, there is no specific rule that defines the boundary between them. The period of time an open position is held in a trading account is based on a strategy executed by the trader. A position trader can hold an open position from months to several years. Swing traders usually keep their positions open for days to several weeks, while day and scalp traders do not hold positions overnight.

Before opening a trading account, it is useful to familiarize yourself with different types of trading accounts and other options available. The easiest way to open a trading account is to visit an online brokerage website. There you will find all information about the services offered, including trading accounts.

Use of a trading account
While a cash account specifies that you can only place a trade with the amount in your account, a margin account, on the other hand, includes a line of credit offered by your broker and allows you to enter more positions that exceed your actual cash balance. When using a margin, interest is charged for positions held overnight. If you're interested in margin, the broker can offer you multiple levels of leverage depending on the size of your account. For example, if you hold $ 10,000, you can use 2: 1 leverage to buy securities with a total value of $ 20,000. It must also be pointed out that in the same way that you make higher profits, you also incur higher losses that can even exceed your initial investment.

Advantages and disadvantages of trading accounts
When discussing the benefits of having a trading account, it's worth noting that this type of account is relatively easy to open online, which means you won't be subject to the geographic restrictions of your location.

Advantages
There are a large number of online brokerage companies offering different types of trading accounts and it is up to you to find the one that best suits your needs. In addition to being easy to set up and easy to access online when needed, all assets on the trading account are held electronically, which means there is no physical transaction.

If used carefully, margin can give you a tremendous profit advantage when executing trades from your trading account. Additionally, many brokers offer various tools to ensure you are making the right investment decision and help traders avoid emotionally based trades. The trading account offers another advantage: the ability to hold and trade different financial instruments on the same account. However, some traders chose to open multiple accounts and keep each class of financial instrument in separate accounts.

Disadvantage
Nonetheless, you should remember that since the trading account offers higher returns than investment accounts, the risk of loss is also greater and can exceed your initial investment. Potentially high profits are pretty attractive, but you should also keep the risks in mind.