When a person has a cash account, he is required to pay the full amount of a securities purchase by the settlement date. This means that he cannot buy on margin or borrowed money. Certain accounts such as IRAs must be cash accounts. These accounts give a person the ability to trade, but they do not offer a lot of options.

Having a cash account negates one's ability to trade short. Trading short generally requires securities or money to be borrowed from a broker or firm. Trading short and making other moves that require borrowing often prove to be the most lucrative trades out there. However, risk is involved for both the borrower and lender. A cash account takes risk completely off of the firm and puts it square on the shoulders of the customer.

How to Trade Stocks with Cash Accounts

In order to trade stocks using a cash account, a person must have enough money in his account to cover the cost of the shares. He must also be able to cover commissions, so it is important to take that into account before trading with a cash account. If money is made on a trade, it will generally be available in the account three business days after the trade date.