Buying Power

Buying power is the total dollar amount you're allowed to use to open new positions in your brokerage account at any given moment. It is not the same as the cash sitting in your account — it also includes money the broker is willing to lend you, called margin, which lets you control a larger position than your cash alone would allow.

Here's how it works in practice: if you deposit $10,000 and your broker offers a common margin arrangement, your buying power might show as $20,000 or even $40,000, depending on the type of account and what you're trading. Cash accounts have no borrowed money, so buying power there simply equals your available cash (minus anything tied up in unsettled trades). Margin accounts add borrowed funds on top, and pattern day trading accounts often get a different, larger multiple specifically for intraday trades that are closed before the market closes.

The nuance that trips people up is that buying power fluctuates constantly and isn't just "how much money I have." As you open positions, your buying power shrinks by the amount those positions require to hold. As trades settle, or as losses reduce your equity, it changes again — sometimes suddenly. Overnight buying power (for positions held past market close) is usually much lower than intraday buying power, because the broker's margin lending rules are stricter for positions exposed to overnight risk. Using more buying power than you're entitled to, or holding margined positions overnight without enough equity, can trigger a margin call, where the broker demands you deposit more cash or forcibly closes positions.

It's also worth separating buying power from your actual risk. Just because you have $40,000 of buying power doesn't mean risking all of it on one trade is a reasonable position size — buying power tells you what you're allowed to deploy, not what you should deploy.