If you’re new to trading and are looking at different trading platforms, you’ve likely stumbled
upon the often confusing concept of margin and cash account trading.
We’re here to help you sort through trading terminology so that you come away with a clear
understanding of the difference between a Webull margin vs. a cash account.
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At the risk of spoiling the fun, we’ll start by offering this piece of advice: If you’re a new trader,
learn about margin trading, but stick to using a cash account for now. Read on to learn why
What Is a Webull Cash Account?
A Webull cash account is pretty much what its name says—you use cash to purchase an asset.
One hundred percent cash, in fact.
You might be wondering—if you weren’t using cash to buy an asset, what would you be using?
A temporary loan, which is where a margin account comes into play.
Using a cash account for investments is straightforward because Webull won’t let you open a
trade unless you can purchase it in full.
The disadvantage is that you might need to wait longer than usual to open a Webull trade.
That’s because if you liquidate a stock, ETF, or another asset in Webull, it’ll take two days for
the cash to settle in your account (meaning you can use it for trading).
Cash settlements are standard for investment trading platforms, given that the settlement period
gives the buyer and seller time to complete the requested transaction.
Advantages of a Cash Account
Cash accounts are ideal for beginner traders and those who don’t want to actively manage their
trades for several reasons, including:
● You can only lose the amount of money you put into the asset, no more.
● Cash accounts are ideal for long-term investments, such as retirement.
● It’s less likely that your emotions will get in the way of a trade compared to a margin
What Is a Webull Margin Account?
A Webull margin account allows you to borrow funds (called “leverage” in the trading world). To
set up a margin account on Webull, you’ll either need cash or assets like stocks that are already
in your account.
You can then use the cash or asset to borrow against these securities so that you can purchase
more of an investment.
The idea is that you’ll borrow against an asset that appreciates, allowing you to earn more
money than you would have using a cash account since you’ll have more invested.
Of course, things don’t always work in a trader’s favor. Opening a margin account is risky
because if the asset you leverage decreases in value, you’ll end up owing much more money
than you invested into it.
Webull offers a generous but not outrageous maximum leverage of four times your buying
power (assets you hold) for leveraged day trades. So, if you have $3,000 in your cash account,
you could borrow $12,000. Add the $3,000 in your cash to that, and you’ll have a $15,000
investment instead of $3,000.
Quite the difference!
Advantages of a Margin Account
Margin accounts are ideal for experienced traders. However, they also have their place for
smaller cash balances if you choose a lower leverage amount.
The advantages of a margin account include:
● A high-income potential
● Can help build up a low bankroll
Margin trading is extremely risky. And if you have less than $25,000 in your Webull account,
you’ll only be able to make three trades within every five business days.
Which Account Is Right for You?
When trying to understand the differences between a Webull margin vs. cash account, it might
help to look at it this way: A risky vs. less risky account.
There’s no shortage of horror stories out there about traders who had no choice but to liquidate
their account due to an expired margin that ended in the red for them.
But that’s not to say that a Webull margin account is inherently bad; you simply need to gain
experience in standard cash account trading first before treading the margin account waters.
FAQs About Webull Margin vs. Cash Accounts
If you’re still curious about how margin vs. cash accounts work, check out the answers below to
some common questions.
How much margin does Webull offer?
Webull offers annual rates between 3.99% – 6.99%. The amount you qualify for will depend on
how large of a balance you have in your account.
Why is my cash balance negative on Webull?
Your cash balance is likely negative if you haven’t had an expected ACH transfer settled in your
account yet, you owe fees, or you have a negative balance from a margin trade.
Why is my buying power less than my cash balance in Webull?
Lower buying powers mean that there’s still cash waiting to settle in your account. Once that
happens, your cash balance will be equal to your buying power.