What Is a Trade Date?

Trade Date Explained in Less Than 4 Minutes

Bespectacled young businesswoman working on laptop drinking coffee

skynesher / Getty Images


The trade date is the specific day on which buying or selling a security—e.g., a stock—occurs.

Definition and Examples of the Trade Date

The trade date marks when an investment trade initially occurs, such as when an offer to purchase a security is accepted. Yet understanding the trade date also depends on understanding what it is not. 


The trade date is not always the same as the settlement date. The latter is the date on which the cash and securities are transferred and completely settled in the right accounts.

So while your trade date to sell 100 shares of a stock might be, say, Monday, August 23, 2021, the cash from the sale might not officially be settled into your account until the settlement date of Wednesday, August 25, 2021. Even if your account shows the cash from the transaction following the trade date, you might not be able to use the cash until the settlement date. The use of such funds to enter another transaction may entail what is termed as a “good-faith violation.”

The trade date might also mark when a bid to purchase securities is accepted, but those stocks, bonds, or other assets could still take time to settle into your account.

This trade date vs. settlement date occurrence is similar to how it can take a few days between when a check deposit is received and when the cash settles in your bank account.

Trade Date Settlement Date
The date on which a securities trade is accepted The date on which the cash and securities involved in a trade are finally delivered into the correct accounts

How Does a Trade Date Work?

The trade date exists to mark when a trade first occurs, as there can be a lag between that date and when all the pieces of the transaction finalize. When you buy a stock, for example, it takes time to transfer your cash to the seller and for the seller to transfer the stock to you. 

Modern stock trading is more technologically advanced than it used to be—you don’t need to physically transfer stock certificates, for example. Still, there are multiple entities involved in the trading process, ranging from brokers to stock exchanges to the National Securities Clearing Corporation (NSCC), which ultimately handles most stock and bond trades.

So while the trade might be accepted almost instantly (marking the trade date), the settlement date would likely come later. Your broker generally can’t just take possession of stocks you purchased right away but rather needs to wait for the NSCC to clear the trade.

Without clearing, the trade might not go through properly. A buyer might not have the cash to complete a trade even though they agreed to it, much like a check might not clear if the check writer does not have sufficient funds in their account. 


In the U.S., most securities need to settle within what’s known as a T+2 timeline, meaning the trade date plus two business days.

If you sell stock on Friday, for example, your broker would have until Tuesday to settle the cash within your account, since that’s two business days after the trade date. So if you need to sell assets to have cash by the weekend, you might want to do so earlier in the week. 

The good news is that this timeline between the trade date and settlement date is shrinking. In 2017, the U.S. switched from T+3 to T+2, and work is underway to shorten that time to T+1 in the coming years.

Once the trade is settled, you should receive a confirmation.

What Does the Trade Date Mean for Individual Investors?

If you know when the trade date occurs, then you can know when the settlement date must occur, keeping in mind that the rules can vary by country and security type.


The trade date is also important to know for tax purposes. To determine issues like in which tax year a security was sold, you would use the trade date—even if the settlement date ended up being the following year, such as if you sold stock on New Year’s Eve.

Knowing the difference between the trade date and settlement date can also help investors understand their finances better and avoid a mistake, like thinking they have cash on hand before a trade settles.

Key Takeaways

  • The trade date marks when a securities trade first occurs, not when the transaction officially closes.
  • As of 2021, most securities need to settle within two business days following the trade date.
  • The trade date, not the settlement date, is generally used for tax purposes.
Was this page helpful?
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. E*Trade. "Stock Trading Rules in Cash Accounts: Understanding Good Faith and Freeride Violations."

  2. DTCC. "About DTCC."

  3. DTCC. "Understanding the Settlement Process."

  4. DTCC. "DTCC Proposes Approach to Shortening U.S. Settlement Cycle to T+1 Within 2 Years."

  5. U.S. Securities and Exchange Commission. "SEC Adopts T+2 Settlement Cycle for Securities Transactions."

  6. IRS. "Publication 550 (2020), Investment Income and Expenses."

Related Articles