If you buy/sell a stock with 100% of your account (not on margin, but with a margin account) will it just be settled immediately, or do you need to be on margin and pay interest to be able to trade with the unsettled funds?

  • 1
    This depends on the broker. I believe that if you actively trade with unsettled funds you'll need the margin, but to buy and hold you may get away without.
    – littleadv
    Apr 3, 2023 at 18:15
  • @littleadv I believe specifically the action is selling a stock purchased with unsettled funds before settlement, known as free riding.
    – user71659
    Apr 4, 2023 at 22:22
  • Ah, good to know! This sounds like an answer
    – littleadv
    Apr 4, 2023 at 22:25
  • @littleadv A margin account can be used to avoid free riding regulation violations, but I'm not sure about how interest accrues in that case.
    – user71659
    Apr 4, 2023 at 23:34
  • @BobBaerker I have been able to purchase new shares with unsettled funds of a previous trade before, without having a margin account. So I'm not entirely sure I understand what it is that you're trying to argue here.
    – littleadv
    Apr 11, 2023 at 17:21

2 Answers 2


This likely varies by brokerage, but at least for Vanguard, you can use unsettled funds to buy new securities without paying margin interest.

My understanding of this is that although you don't officially get the funds from the sale until Trade+2 days, you also don't officially pay for the new securities until T+2. On normal circumstances, brokerages will set that money aside from your balance, so you don't double-spend, but it's not handed over to the seller until settlement.

  • Fidelity allows this too, without paying margin interest.
    – Craig W
    Apr 11, 2023 at 16:04

In a cash account, you can use the proceeds from selling a fully paid for and settled security for the purchase of another security. However, you cannot sell the second stock prior to the settlement of the first stock sale. Otherwise, it's a violation.

In a margin account, you do not have to wait until settlement to use the capital again. You can trade as frequently as you like (assuming that you're not violating the Pattern Day Trader rule) and there is no borrow charge involved.

  • In a cash account, the proceeds must settle before they can be used again - that is verifiably false.
    – littleadv
    Apr 11, 2023 at 17:22

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