RiskPicksWhat is Buying Power?
Buying power is the total amount of money you can use to buy stocks right now. It is not the same as your account balance. Your buying power includes your settled cash plus any margin (borrowed money) your broker makes available to you.
Why buying power differs from your balance
- Margin accounts: if you have a margin account, your broker typically gives you 2x buying power for overnight positions and 4x for day trades (if your account is over $25,000). So a $30,000 account might show $120,000 in day trade buying power
- Unsettled funds: after selling a stock, the cash takes one business day to settle (T+1). Until it settles, it may reduce your available buying power depending on your account type. See T+1 Settlement
- Open positions: money tied up in current positions reduces your available buying power
- Pending orders: open limit orders reserve buying power even if they have not filled yet
Day trade buying power vs overnight buying power
- Day trade buying power (4x): available for round trips closed the same day. A $25,000 account gets $100,000 in day trade buying power
- Overnight buying power (2x): available for positions held overnight. The same $25,000 account gets $50,000 for overnight holds
- Cash account (1x): no margin. You can only trade with settled cash. No day trade buying power multiplier
New traders often see their 4x day trade buying power and think they should use all of it. Using maximum buying power means maximum risk. Position sizing should be based on your risk per trade, not your available buying power.