The two main types of brokerage accounts use margin and cash. Whereas a margin account allows traders to borrow money to in order to buy or short sell leveraged securities, a cash account requires that all transactions must be paid upfront, which are most often long (buy and hold) positions.
With a margin account, you can speculate on bull and bear markets depending on your strategy, only having deposited a small fraction of the trade’s original value. On the other hand, investors that are purchasing securities with a cash account must settle the buy order with a cash deposit, or they can sell an existing position on the same trading day.
There are pros and cons for both types of trading account, and this depends on your overall trading strategy and goals, whether they are short or long-term, and whether you have the funds readily available to pay upfront. Typically, a margin account is preferred for short-term trading, whereas a cash account is more suited to medium or long-term investments, such as pensions.