Investors can open a cash account to trade stocks, ETFs, mutual funds, etc. However, when you buy or sell securities in a cash account, it takes 1 business day for the transaction to settle.

“Settlement” is set by federal securities regulations and refers to the official transfer of the securities to the buyer’s account and the cash to the seller’s account. The settlement period is 1 business day after the trade date for stock and option transactions. For example, if a stock is purchased on Monday, the transaction would settle on Tuesday; if the position is closed on Thursday, the transaction would settle on Friday.

There are cash account rules that investors must follow while trading in a cash account. Transactions involving unsettled funds can sometimes lead to a Good Faith Violation and a 90-Day Restriction for the account.