how a trading account works
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 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 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 your social security number and contact details depending on the jurisdiction and business details your brokerage firm may have other requirements as well finra margin requirements for trading accountsmaintenance requirements for pattern day trading accounts are considerably higher than those of non pattern trading the base requirements of all margin investors are outlined by the 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 1 the trader is permitted a purchasing power of up to four times any excess over that minimum requirement equity held in non trading accounts is not eligible for this calculation a trader who fails to meet these requirements will receive a margin call from their broker and trading will be restricted if the call is not covered within five days 2