# Account Types and Margin Rules > Cash, margin, portfolio margin and retirement accounts follow different rules. Learn Regulation T, maintenance margin, settlement and good faith violations. Source: https://learn.tradelabsai.com/industry/account-types-and-margin-rules/ Track: The Trading Industry · Level: Intermediate · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "Account Types and Margin Rules", https://learn.tradelabsai.com/industry/account-types-and-margin-rules/ The type of brokerage account you open determines what you can trade, whether you can borrow, how quickly you can reuse money and which rules apply. A cash account is simple and limits losses to what you deposit. A margin account lets you borrow and sell short, with more flexibility and more risk. Specialised accounts such as portfolio margin and retirement accounts follow their own rules. This lesson focuses on US rules for securities; futures and other countries differ. ## Main account types | Account | Borrowing | Short selling | Key rules | |---|---|---|---| | Cash account | No | No | Trade with settled funds; free riding prohibited | | Margin account (Reg T) | Yes | Yes | Initial and maintenance margin; PDT rule applies | | Portfolio margin | Yes, risk based | Yes | Higher minimums; margin based on portfolio risk scenarios | | Retirement accounts (IRA, 401k) | Generally no | Generally no | Tax advantages; limited margin features | | Futures account | Performance bond margin | Yes | CFTC and exchange rules. See [Futures Margin: Initial and Maintenance](https://learn.tradelabsai.com/futures/futures-margin/) | ## Cash account rules - **Settlement:** US stock trades settle T+1, one business day after the trade, since 28 May 2024. - **Good faith violation:** buying with unsettled sale proceeds and selling before those proceeds settle. - **Free riding:** buying securities and paying for them only with the proceeds of selling those same securities. Violations can lead to a 90 day restriction to trading only with settled cash. ## Margin account rules | Rule | Requirement (typical) | |---|---| | Minimum to open margin | $2,000 under FINRA rules | | Initial margin (Regulation T) | 50% of the purchase price for most stocks | | Maintenance margin (FINRA minimum) | 25% of the market value of long positions; brokers often require 30% or more | | Short sale initial margin | 150% of the short value, including the sale proceeds | Regulation T is set by the Federal Reserve. Brokers can and often do set stricter requirements, especially for volatile stocks. **Example: When a margin call arrives** A trader buys $20,000 of stock with $10,000 of their own money and $10,000 borrowed, meeting 50% initial margin. With a 25% maintenance requirement, the account receives a margin call when equity falls below 25% of the stock's value. Equity equals stock value minus $10,000 of debt, so the call triggers when stock value minus 10,000 equals 0.25 times stock value, which gives a stock value of about $13,333, a fall of about 33%. At that point equity is about $3,333. The trader must deposit cash or sell stock, or the broker may sell positions without notice. See [Margin](https://learn.tradelabsai.com/markets/margin/). ## Portfolio margin Portfolio margin sets requirements based on the modelled loss of the whole portfolio under price moves, often allowing much lower margin for hedged positions and higher leverage overall. It typically requires a large minimum equity, often $100,000 or more depending on the broker, and options approval. Higher leverage means larger potential losses. See [Leverage](https://learn.tradelabsai.com/markets/leverage/). ## Margin interest Borrowing on margin costs interest, usually at rates that fall as the balance rises. Over long holding periods, margin interest can significantly reduce returns. See [Margin Financing](https://learn.tradelabsai.com/industry/margin-financing/) and [Financing and Overnight Costs](https://learn.tradelabsai.com/orders/financing-and-overnight-costs/). ## Options approval levels Brokers assign options trading levels based on experience and finances, from covered calls at the lowest level to uncovered (naked) options at the highest. Margin accounts are needed for most spread and short option strategies. See [Options Trading](https://learn.tradelabsai.com/markets/options-trading/). ## Outside the US | Region | Notable rules | |---|---| | EU and UK | Retail leverage limits on CFDs and forex, negative balance protection. See [CFD Trading](https://learn.tradelabsai.com/markets/cfd-trading/) | | Futures everywhere | Margin set by exchanges and brokers, marked to market daily. See [Mark-to-Market](https://learn.tradelabsai.com/markets/mark-to-market/) | | Crypto exchanges | Leverage and liquidation rules set by each venue. See [Liquidations in Crypto](https://learn.tradelabsai.com/crypto/liquidations-in-crypto/) | ## Frequently asked questions ### What is the difference between a cash and a margin account? A cash account uses only your own settled money; a margin account lets you borrow against your holdings and sell short, under margin rules. ### What is Regulation T? A Federal Reserve rule that sets initial margin for securities purchases, typically 50% for stocks, and governs credit extended by brokers. ### What is a good faith violation? Buying a security with unsettled funds in a cash account and selling it before those funds settle. Next, learn about limits on position size and reporting rules in [Position Limits and Regulatory Reporting](https://learn.tradelabsai.com/industry/position-limits/). ## Continue learning - Next lesson: [Position Limits and Regulatory Reporting](https://learn.tradelabsai.com/industry/position-limits/) - Previous lesson: [Pattern Day Trader Rule](https://learn.tradelabsai.com/industry/pattern-day-trader-rule/) - Related: [Pattern Day Trader Rule](https://learn.tradelabsai.com/industry/pattern-day-trader-rule/): The US pattern day trader rule applies to margin accounts with four or more day trades in five business days. Learn the $25,000 minimum, workarounds and changes. - Related: [Margin](https://learn.tradelabsai.com/markets/margin/): Margin is the deposit you put up to borrow money or open leveraged positions. Learn initial and maintenance margin, margin calls, interest and how to avoid them. - Related: [Margin Financing](https://learn.tradelabsai.com/industry/margin-financing/): Margin financing lets traders borrow from brokers against their holdings. Learn how margin loans are priced, collateral haircuts, margin calls and financing risks. - Related: [Leverage](https://learn.tradelabsai.com/markets/leverage/): Leverage lets you control a larger position with less money. Learn how leverage ratios work, how they magnify gains and losses and how to use leverage safely. - Related: [Futures Margin: Initial and Maintenance](https://learn.tradelabsai.com/futures/futures-margin/): Futures margin is a performance bond, not a loan. Learn initial and maintenance margin, day trading margin, margin calls, SPAN and how to avoid forced liquidation.