Buying Power
The number a platform shows as available is a calculation with several inputs, and it is not the same as the money in the account.
MadStockAlerts Research · Updated August 29, 2026
What to take away
- Buying power in a margin account is typically a multiple of the cash, not the cash.
- Day-trading buying power is a separate and larger figure with its own rules.
- Unsettled proceeds count differently depending on the account type.
- Options and short positions consume buying power in ways that are not proportional to their cost.
- A figure that looks available can be withdrawn by a requirement change without any trade occurring.
MAD Academy Training Video · 0:45
The Number That Is Not Your Money
Buying power in a margin account includes borrowed funds, so using all of it means being fully leveraged.
This lesson is part of a Stock Alerts + Tools plan.
Where the number comes from
In a cash account, buying power is settled cash, and the calculation ends there. In a margin account it is a derived figure: the equity in the account, less what is already committed, multiplied by the leverage the account's requirements permit.
| Account state | Typical buying power |
|---|---|
| $10,000 cash, cash account | $10,000 |
| $10,000 cash, margin account | About $20,000 for marginable securities |
| $10,000 cash, pattern day trader | Up to about $40,000 intraday, subject to the rules |
| $10,000 in a concentrated volatile name | Materially less, because the house requirement is higher |
The third row is a different number governed by different rules and available only intraday. Holding a position financed with day-trading buying power overnight produces a call the following morning, because the overnight requirement is the ordinary one.
What consumes it
Buying power is reduced by more than purchases, and several of the reductions are not proportional to the amount of money involved.
- An open short position ties up margin against a potential loss with no upper bound, so the requirement is larger than the proceeds.
- A sold option carries a requirement based on the exposure, not on the premium received.
- An unsettled purchase in a cash account holds the cash until settlement.
- A position whose house requirement is raised consumes more buying power without anything being traded.
The second item is where accounts most often find themselves unexpectedly constrained. Selling an option collects a small premium and can consume a large multiple of it in requirement, and the requirement rises as the position moves against the seller.
- Account equityCash plus the value of what is held
- x the leverage the requirements allowRoughly 2 to 1 on marginable equities
- - requirements on open positionsIncluding higher house requirements on volatile names
- - requirements on short and option positionsSized to the exposure, not to the premium received
- = buying power
The pattern day trader rule
An account executing four or more day trades within five business days, where those trades are more than six percent of total trading activity in the period, is designated a pattern day trader. The designation carries a minimum equity requirement of $25,000.
Below that equity level, a designated account cannot day trade at all until the balance is restored. The rule applies to margin accounts; a cash account is not subject to it and is instead subject to settlement, which constrains the same activity by a different route.
A day trade is an opening and closing of the same security on the same day. Buying on Monday and selling on Tuesday is not one, which is why the rule constrains intraday activity specifically rather than short holding periods generally.
Why the number can fall on its own
Buying power is recalculated continuously from current prices and current requirements, so it moves without any action being taken.
| Event | Effect |
|---|---|
| A holding falls in value | Equity falls, and buying power falls by a multiple of it |
| A house requirement is raised | The same positions consume more, immediately |
| A security becomes non-marginable | It stops contributing any borrowing capacity at all |
| A dividend is paid | Value moves from the share price to cash, roughly neutral |
The third row is the abrupt one. A security that ceases to be marginable, which can follow a large decline or a listing change, stops supporting the loan against it, and an account holding it can move from comfortable to a call without a trade being placed.
Buying power in a cash account
A cash account's buying power is settled cash, and the whole of the complexity is in the word settled. US equity trades settle one business day after the trade date, and cash from a sale is not available until then.
| Action | Effect on available cash |
|---|---|
| Deposit clears | Available, subject to the broker's hold policy |
| Sell a position | Unsettled proceeds, available to buy but not to withdraw |
| Buy with unsettled proceeds | Permitted, provided the new position is held until settlement |
| Sell that position before settlement | A good-faith violation |
| Withdraw unsettled proceeds | Not available until settlement |
The distinction in the second row is the one that matters: unsettled proceeds can be used to buy and cannot be used to withdraw, and using them to buy carries the obligation to hold.
Deposits are subject to a separate hold. A transfer that appears in the balance may not be available for withdrawal for several business days while the broker confirms it, which is a bank settlement matter rather than a securities one.