In stocks, buying power is the dollar amount you can spend on securities in your brokerage account right now. In a cash account, that number equals your settled cash, dollar for dollar. In a margin account, it’s typically double your equity for positions held overnight, and up to four times your equity for intraday day trades, because the broker lends you the rest against your holdings as collateral. Which account you have, which securities you’re buying, and what else is going on in the account all change the figure your platform displays.
Buying Power in a Cash Account
A cash account is the simplest setup. Your buying power equals your settled cash, and there’s no borrowing involved. If you have $2,000 in settled funds, you can buy $2,000 worth of stock and nothing more. Settled funds include deposited cash and the proceeds from earlier sales that have finished the settlement process.
Settlement currently follows a T+1 standard, meaning a trade settles one business day after the transaction date. The SEC adopted this shortened cycle effective May 28, 2024, replacing the older T+2 timeline.1U.S. Securities and Exchange Commission. SEC Chair Gensler Statement on Upcoming Implementation of T+1 Settlement Cycle Sell a stock on Monday and those proceeds settle Tuesday and become available for a new purchase. Until settlement completes, that money doesn’t count toward your usable buying power, and buying with it before it settles can trigger account restrictions.
Buying Power in a Margin Account
A margin account lets you borrow money from your broker to buy securities, which amplifies your buying power beyond your cash balance. For positions held overnight, the standard ratio is two-to-one: deposit $5,000 in cash and you’ll typically see $10,000 in buying power. The broker is lending you the other half, and you’ll pay interest on that loan for as long as the position is open.
The Federal Reserve Board sets the ceiling on how much a broker can lend you at the moment you open a position. Under Regulation T (12 CFR Part 220), the initial margin requirement for most equity securities is 50% of the purchase price.2eCFR. 12 CFR 220.12 – Supplement: Margin Requirements To buy $10,000 of stock on margin, you need at least $5,000 of your own equity in the account. This is a federal floor, not a ceiling: brokerages can demand more for volatile or thinly traded securities, but they can never require less.
Before you can start trading on margin at all, FINRA Rule 4210 requires a minimum equity deposit of $2,000 in the account.3FINRA.org. FINRA Rule 4210 – Margin Requirements Once the account is open, your buying power fluctuates throughout the day as your existing holdings gain or lose value, because those holdings serve as collateral for the broker’s loan.
Maintenance Margin
The 50% requirement applies when you enter a trade. After that, a lower ongoing threshold takes over: the maintenance margin. FINRA Rule 4210 sets this minimum at 25% of the current market value of long positions. In practice, most brokerages set their internal “house” requirements higher. A 30% minimum is common, and volatile stocks can carry requirements of 40% or more.4Charles Schwab. Understanding Risk-Based Concentration and Margin Brokerages can raise these thresholds at any time without advance written notice.
When your equity drops below the maintenance threshold, the broker issues a margin call demanding you deposit more cash or sell holdings to restore the required level. Brokers are not legally required to notify you before liquidating your positions. They can sell your stocks without calling you, without waiting, and they can sell more than the minimum needed to cover the shortfall.5FINRA.org. Know What Triggers a Margin Call Most brokerages issue warnings as a courtesy, but you shouldn’t count on receiving one.
Day Trading Buying Power
Traders who execute four or more day trades within five business days get classified as “pattern day traders” under FINRA rules. Once flagged, the account must maintain a minimum equity of $25,000 at all times. In exchange, the buying power ratio jumps to four-to-one for intraday trades, so $25,000 in equity can support up to $100,000 in day-trading positions.6FINRA.org. Day Trading That leverage evaporates for anything held overnight, where the standard two-to-one ratio applies.
Exceeding your day-trading buying power creates a special margin deficiency. You get five business days to deposit funds and meet the call. If you don’t, the account is restricted to cash-only trading for 90 days.7Federal Register. Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend FINRA Rule 4210 If your equity falls below $25,000 for any reason, you also can’t place new day trades until the balance is restored.
How Short Selling Affects Buying Power
Short selling eats into buying power in a way that surprises many traders. When you sell a stock short, Regulation T requires a deposit equal to 150% of the position value: the full 100% in proceeds from the sale, which the broker holds as collateral, plus an additional 50% from your own equity. Shorting $20,000 of stock ties up $30,000 in your account. The cash proceeds from the short sale are not available to buy other securities, because they’re pledged as collateral to guarantee you can return the borrowed shares.
Maintenance margins on short positions are also higher than on long positions. FINRA requires a minimum of 30% of the current market value for short equity positions, compared to 25% for longs. If the stock you shorted rises, the collateral requirement grows with it, pulling your available buying power down further. Short squeezes can trigger margin calls very fast for this reason.
What Quietly Reduces Your Buying Power
Several factors can shrink your available buying power even when your total account balance looks healthy:
- Open limit orders. A pending order reserves those funds immediately. If you have $10,000 in buying power and place a $6,000 limit order, your usable buying power drops to $4,000 until the order fills or you cancel it.
- Non-marginable securities. Under Regulation T, certain securities require 100% cash to purchase and contribute nothing to your margin leverage. This category includes stocks trading below $5 per share, recent IPOs (typically non-marginable for 30 days after listing), and most over-the-counter securities.2eCFR. 12 CFR 220.12 – Supplement: Margin Requirements
- Unsettled proceeds. Even in a margin account, some transactions have proceeds that won’t be available until T+1 settlement completes.
- Options positions. Selling uncovered options ties up substantial buying power because the risk is theoretically unlimited. Buying options costs the premium upfront but doesn’t consume margin beyond that.
- Concentration penalties. Holding a large position in a single security relative to its trading volume can trigger elevated margin requirements, and that additional margin directly reduces your buying power for other trades.
These factors stack. An account with $50,000 in equity could have far less usable buying power if it holds non-marginable stocks, has several open limit orders, and carries uncovered options positions.
The Cost of Using Margin
Borrowed money isn’t free. Margin interest accumulates daily and gets charged monthly, so the leverage that boosts your buying power carries a running cost. As of early 2026, rates at major brokerages range widely depending on the firm and your loan balance. Interactive Brokers charges roughly 4.1% to 5.1% on USD margin balances, while Fidelity and Schwab charge between about 10% and 11.3% on smaller balances, dropping to around 7.5% for loans above $1.5 million.8Interactive Brokers. US Margin Loan Rates Comparison The difference between brokers is large enough that frequent margin users should compare rates.
Margin interest can be claimed as investment interest expense on your federal return, limited to your net investment income for the year, with any excess carrying forward.9Office of the Law Revision Counsel. 26 USC 163 – Interest You have to itemize to take it, using IRS Form 4952.
Portfolio Margin for Large Accounts
Traders with large accounts may qualify for portfolio margin, which calculates buying power based on the overall risk profile of the account rather than applying the same flat percentages to every position. Instead of the rigid 50% initial margin under Regulation T, portfolio margin uses theoretical pricing models to estimate the worst-case loss across all positions, then sets margin at that level.10Charles Schwab. Portfolio Margin vs Regulation T Margin Well-hedged portfolios get substantially more buying power than they would under standard rules; concentrated, unhedged portfolios see little benefit.
Eligibility is limited. Most brokerages set their own minimums, commonly in the $100,000 to $150,000 range for accounts trading listed options and equities, and FINRA Rule 4210(g) requires at least $5 million in equity for accounts holding unlisted derivatives.3FINRA.org. FINRA Rule 4210 – Margin Requirements This isn’t a tool most investors need to think about; standard cash or margin buying power is what will apply to the vast majority of accounts.