what is buying power in stocks: Guide

Buying power (stocks)

Buying power is the amount of capital an investor can use immediately to buy securities. In stock trading, buying power typically equals settled cash plus any available margin or borrowing capacity in a brokerage account. Exactly what counts as buying power depends on account type (cash, margin, retirement), broker risk rules, regulatory limits such as Regulation T, and settlement timing for deposits and trade proceeds.

This article explains what is buying power in stocks, how it is calculated, how settlement and margin affect it, where to find it on a brokerage platform (including how Bitget surfaces available funds), worked numeric examples, common FAQs, and practical best practices for managing buying power and leverage.

Note: the term buying power is used here in a trading/investing context. It should not be conflated with broader macroeconomic concepts such as purchasing power.

Key definitions and related terms

• Buying power — the funds an investor may use immediately to buy securities. For clarity, the phrase what is buying power in stocks appears throughout this article as the core query we answer.
• Cash balance — money in an account that is currently held (may include unsettled items unless the broker separates them).
• Settled funds — cash available after settlement rules complete for deposits or trade proceeds (commonly T+2 or T+1 depending on market and instrument).
• Unsettled funds — proceeds from recent trades or deposits not yet cleared for reuse in cash accounts.
• Margin loan / margin availability — borrowing capacity provided by a broker against eligible securities used as collateral.
• Excess equity / excess margin — the amount by which account equity exceeds required margin; often shown as “available to trade” or “excess margin.”
• Buying power vs purchasing power — buying power here is brokerage-level immediate purchase ability; purchasing power is an economic measure of how much goods/services money will buy.
• Maintenance margin — the minimum equity percentage an account must hold after a trade; falling below triggers margin calls.

How buying power is determined

Buying power is the sum of several components and adjustments. Brokers typically compute it in real time and may display different fields (Available Cash, Buying Power, Margin Available, Excess Liquidity). The main components are:

• Settled cash balance — confirmed cash available after settlement.
• Unsettled deposits/trades — may appear in a balance but not count toward buying power in cash accounts until settled.
• Margin borrowing capacity — determined by pledged collateral values, initial margin rules, and broker risk models.
• Loan value (LTV) of securities — brokers assign loan values or haircuts to positions; volatile or low‑liquidity securities get lower loan values.
• Open orders and holds — pending buy orders reserve buying power; pending withdrawals reduce available buying power.
• Broker-specific risk adjustments — concentration limits, per‑security limits, or additional haircuts for certain sectors (penny stocks, leveraged ETFs, low‑float names).

Brokers often show both a simple buying power number and a breakdown (cash vs margin). When you place orders, the platform typically checks the buying power at order submission and again at execution.

Settled vs unsettled funds

Settlement cycles differ by market and instrument. For U.S. equities, most cash trades settle T+2 (trade date plus two business days). Some brokerages offer faster settlement for specific types of deposits or use instant credit rules for debit card deposits.

Key points:

• In a cash account, unsettled proceeds from a sale do not increase usable buying power for another purchase until settlement completes, unless the broker offers an exception.
• Using unsettled funds to buy securities and then selling them before settlement can create a free‑riding or good‑faith violation in many jurisdictions.
• Brokers may provide “instant buying power” for verified deposits but later place holds or adjust if deposit proves invalid.

Example: If you sell $10,000 of stock on Monday in a U.S. cash account, those proceeds generally settle on Wednesday (T+2). Until Wednesday, some brokers will not let you use that $10,000 to purchase new holdings without risking a violation.

Account types and buying power differences

Buying power behaves differently across account types. Below are the typical differences.

Cash accounts

• Buying power = settled cash (minus any open orders).
• No borrowing: you cannot use leverage.
• Settlement rules apply: reuse of sale proceeds is subject to settlement timing (typically T+2 for stocks).
• Good‑faith and free‑riding rules apply: buying with unsettled funds then selling before settlement can lead to account restrictions.

Margin accounts

• Buying power = settled cash + margin borrowing capacity.
• Initial margin rules (Regulation T in the U.S.) commonly require 50% of the purchase price be funded by the investor for a new position; brokers often allow up to 2:1 buying power for overnight positions (i.e., you can buy up to twice your cash, though actual limits vary).
• Maintenance margin requirements (often 25% minimum equity but broker typically requires higher levels) must be met; falling below triggers margin calls.
• Margin increases buying power but introduces interest costs and forced‑liquidation risk.

Retirement accounts (IRAs)

• Many retirement accounts are cash accounts only (no margin loans), so buying power = settled cash.
• Some custodians allow limited margin-like features (e.g., portfolio margin within certain plans), but rules are stricter and vary by provider and jurisdiction.

Cash management / crypto accounts

• Brokerages that offer combined cash management or crypto features may show separate balances (e.g., fiat cash vs crypto), with buying power for equities usually tied to fiat settled cash.
• Crypto margin or synthetic margin products are broker-dependent; Bitget Wallet and Bitget trading services surface separate availability for spot and margin trading.

Day‑trading / Pattern Day Trader rules

• Intraday margin: many U.S. brokers permit up to 4:1 intraday buying power for margin accounts that meet pattern day trader (PDT) rules and have sufficient equity.
• PDT rule: in the U.S., accounts flagged as pattern day traders (four or more day trades in five business days) must maintain a minimum equity of $25,000 to use 4:1 intraday leverage.
• Overnight margin: intraday leverage resets at market close; overnight positions are subject to lower leverage (commonly 2:1) and stricter margin requirements.
• Brokers may impose stricter intraday limits or disable day‑trading leverage for accounts that do not meet standards.

How buying power is calculated — formulas and examples

Exact formulas vary by broker, but the following simple representations illustrate typical approaches.

Cash account (simple):

Buying power = Settled cash − Open buy orders − Pending withdrawals

Margin account (simplified):

Buying power = Settled cash + (Eligible securities loan value × Initial margin leverage) − Open orders − Required maintenance buffer

With Regulation T (U.S. stock example):

• Reg T initial margin is commonly 50% of purchase value for new long positions.
• A simplified view: if you have $10,000 cash in a margin account, initial buying ability can approach $20,000 (2:1), subject to broker rules and security loan values.

Day‑trading intraday example (4:1):

• If you qualify, $25,000 equity could give up to $100,000 intraday buying power, but margin maintenance and per‑security limits still apply.

Worked examples

1. Cash account

• Settled cash: $8,000
• Open buy orders: $500
• Buying power = $8,000 − $500 = $7,500

1. Margin account (Reg T initial margin example)

• Settled cash: $10,000
• Eligible margin securities held: $5,000 market value, loan value 50% = $2,500
• Broker allows 2:1 buying power for new purchases up to Reg T limits
• Approximate buying power = $10,000 + $2,500 = $12,500 (open orders and buffers not shown)

1. Day‑trader intraday example (4:1)

• Account equity: $30,000
• Qualifies for PDT intraday leverage
• Intraday buying power ≈ 4 × $30,000 = $120,000 (subject to broker checks and per‑security rules)

Remember: brokers recompute values using internal risk models and security‑specific haircuts; the real buying power displayed is authoritative.

Regulation and broker rules that affect calculation

• Regulation T (U.S.) establishes initial margin requirements (commonly 50%) for many equity purchases. It does not override broker risk policies, which may be stricter.
• FINRA sets rules governing margin maintenance and pattern day trading; exchanges may set additional listing or short‑selling rules.
• Brokers may apply higher initial/maintenance margins for volatile stocks, low‑float names, penny stocks, leveraged ETFs, or illiquid securities.
• Different instruments (options, futures, OTC securities) have distinct margin regimes and margin calculators.

Buying power for specific instruments

• Stocks: loan values generally 50% for many blue‑chip stocks but lower for volatile or restricted names.
• Options: buying power for option purchases equals the premium cost; selling options (writing) creates margin obligations and can increase or reduce available buying power depending on covered vs uncovered positions.
• Short selling: proceeds from a short sale are typically held as collateral; margin is required and buying power is affected by short margin haircuts and required cash reserves.
• ETFs & mutual funds: ETF margin often follows stock rules; mutual funds may have holding period and settlement differences that affect margin and buying power.
• Crypto: exchange/broker rules vary widely. Bitget displays separate spot balance and margin availability for crypto products; margin lending, isolated vs cross margin, and loan‑to‑value differ by instrument.

Where to find buying power in your brokerage platform

Most brokerages provide clear displays in the account dashboard and order entry screens. Typical labels include:

• Buying Power
• Available Funds
• Cash Available
• Margin Available or Excess Margin
• Buying Power (Day) — for intraday limits

On mobile apps, the order ticket usually shows “Buying Power” and will warn you if an attempted order exceeds available buying power. On Bitget, check the Account Overview or Wallet page for 'Available Balance' and the Trading interface for 'Margin Available' or 'Buying Power' indicators. Bitget’s margin products explicitly show cross and isolated margin availability and the borrowing cost if you elect to use margin.

Effects of orders, trades and account activity on buying power

Buying power changes in near real time as you interact with the market:

• Placing a buy order reduces displayed buying power by the order amount (held) until it is filled or canceled.
• Selling a position increases buying power only after settlement if you’re in a cash account; in margin accounts, selling immediately frees margin capacity.
• Pending deposits are held until cleared; some brokers credit instant buying power subject to verification.
• Withdrawals reduce buying power once processed.
• Corporate actions (dividends, splits) and corporate news that affects margin haircuts can change buying power.
• Intraday price swings affect loan values on securities used as collateral, altering margin availability and buying power.

Risks, costs and consequences

• Leverage multiplies gains and losses. Using margin increases both upside and downside.
• Interest on margin loans accrues while borrowed; costs vary by broker and outstanding amounts.
• Maintenance margin shortfalls trigger margin calls. If not met, brokers may liquidate positions without prior consent.
• Forced liquidations can occur at inopportune prices, causing realized losses beyond planned risk.
• High intraday leverage (4:1) increases exposure to short‑term volatility and rapid deleveraging.
• Using unsettled funds improperly can lead to trading restrictions and account limitations.

Practical guidance and best practices

• Know your broker’s exact definitions and where they display buying power. Platforms differ in labels and rounding.
• Avoid using the full available buying power; leave a buffer above required maintenance margin.
• Understand settlement timings for your instruments and account type.
• For margin users: calculate worst‑case drawdowns to ensure you can meet maintenance requirements without forced sales.
• For day traders: be aware of the Pattern Day Trader rule and the $25,000 minimum equity requirement in the U.S.
• Use stop orders and risk management tools; check borrowing costs and how interest is charged on margin use.
• If you trade crypto alongside stocks on a single platform (for example, using Bitget trading and Bitget Wallet), keep separate risk budgets and understand that crypto collateral valuations can be more volatile.

Common FAQs

Q: Can I use unsettled funds to buy stocks? A: In a cash account, unsettled proceeds usually cannot be used to buy new securities without risking a good‑faith violation. Some brokers offer temporary credit for verified deposits; check your broker’s policy.

Q: What happens when I run out of buying power? A: Orders exceeding buying power are rejected or require additional funding. In margin accounts, if buying power falls below requirements due to price moves, you may receive a margin call.

Q: How is buying power different for options? A: Buying options requires paying the premium. Selling (writing) options creates margin and potential obligations that affect buying power; strategies like covered calls vs naked puts differ materially.

Q: When will deposited funds be available? A: Depends on deposit method and broker verification: ACH transfers typically take several business days to settle; wire transfers may be faster. Brokers often state availability timelines in their help center.

Examples and worked calculations

Example 1 — Cash account purchase

• Settled cash = $6,000
• You place an order for $5,500. The broker shows Buying Power = $6,000 and reserves $5,500 as a hold. After fill, your buying power drops to $500. If you sell that new position the same day, proceeds typically settle in T+2 and are not reusable until settled.

Example 2 — Margin account with 2:1 overnight buying power

• Settled cash = $12,000
• Broker allows 2:1 (subject to interest and haircuts)
• Maximum approximate purchase = $24,000 (actual allowed amount depends on security loan values and open orders)

Example 3 — Day‑trading account (4:1 intraday)

• Equity = $40,000 and account is classified for PDT privileges
• Intraday buying power ≈ $160,000 (4×). If you hold positions overnight, your overnight buying power will drop to the normal margin limit (e.g., 2×) and you must meet overnight margin requirements.

Example 4 — Short selling and reserved cash effect

• You short 100 shares at $50 = $5,000 proceeds are typically held as collateral; your buying power will be impacted by additional margin requirements for the short position, which often exceed those for a long position on the same security.

Regulation, compliance and investor protections

• Regulation T (U.S.) governs initial margin lending policies for many equity trades. It typically requires 50% initial equity for new purchases.
• FINRA enforces margin maintenance and pattern day trading rules; brokers must follow these and may apply stricter standards.
• Brokers are required to disclose margin interest rates, how margin is calculated, and relevant account agreements.
• Investors should consult broker documentation and regulatory notices for detailed, account‑specific rules.

Where recent market context matters (selected news highlights)

• As of 2024, data compiled by Morningstar and Hartford Funds shows dividends contributed meaningfully to long‑term stock returns, illustrating why trading decisions and buying power management should account for dividend timing and settlement effects (reporting period: through 2024; source: Morningstar and Hartford Funds reporting).

• As of March 15, 2025, Bitcoin’s price fell below $88,000 and triggered a surge in derivatives liquidations; this market volatility example (reported March 15, 2025 by Bitcoin World monitoring) underscores how sudden price moves can quickly erode margin collateral and reduce buying power on platforms that link crypto and equities.

These dated reports illustrate the need to monitor macro and micro events: dividend payments change cash flows and settlement timing; crypto or equity shocks can change loan values and margin availability.

References and further reading

Sources used to inform this article include broker FAQs and educational pages, investor‑education sites, and regulatory guidance. Representative sources include Investopedia, Nasdaq guidance on investor terms, broker help pages (Public, SoFi, RBC, TD), CenterPoint Securities educational notes, and FINRA rules on margin and day trading. Specific broker displays differ; consult your broker’s official documentation for exact definitions.

(Reporting notes above reference data ranges and dates: e.g., dividend contribution data summarized through 2024 by Morningstar/Hartford Funds; Bitcoin correction reported March 15, 2025.)

See also

• Margin (finance)
• Pattern Day Trader rule
• Settlement (securities)
• Short selling
• Options margin
• Leverage (finance)
• Broker account types

Practical checklist: Before using buying power

• Read your broker’s definition of Buying Power / Available Funds.
• Confirm settlement rules for your account and instruments (T+2, T+1, or other).
• Know the broker’s margin rates and how interest is calculated.
• Maintain a conservative buffer above maintenance margin requirements.
• Monitor positions that serve as collateral; mark‑to‑market moves affect loan values.
• If you use Bitget for combined crypto and margin products, keep crypto collateral volatility in mind and separate risk budgets across spot, margin, and derivatives.

Final notes on scope and variability

what is buying power in stocks can be answered generally, but exact values and labels vary by broker, jurisdiction, account type, and the specific securities you hold. Always check your brokerage’s help center for the authoritative definition and the live buying power number shown on your platform.

If you use Bitget, review Bitget’s account dashboard or Bitget Wallet to see your Available Balance and Margin Available fields. For active traders, Bitget’s margin tools and clear displays for cross vs isolated margin can help track buying power in real time.

Further exploration: if you want actionable steps, verify your account type (cash vs margin), read the margin agreement, and practice conservative position sizing to avoid margin calls. Explore Bitget’s educational resources to see how buying power is shown in the Bitget trading interface and Bitget Wallet.

Common mistakes to avoid

• Confusing ledger cash with settled cash.
• Relying on maximum displayed buying power without leaving a margin buffer.
• Ignoring maintenance margins and interest costs when using margin.
• Failing to account for corporate actions, dividends, or pending withdrawals.

Short FAQ recap

• Can buying power be negative? Yes. If you withdraw funds or a position falls and you owe more than you have, available buying power can be zero or negative, prompting margin actions.
• Does a broker always show real‑time buying power? Usually yes, but there can be short delays. The displayed number is the broker’s authority.
• Is buying power the same across brokers? No. Each broker applies its risk model and may show additional buffers or restrictions.

Further exploration and bitget note

To see how these concepts appear in practice, open your trading account dashboard. On Bitget, check Account Overview → Available Balance and the Order Ticket → Buying Power / Margin Available fields; Bitget also shows borrowing rates and margin health indicators for leveraged positions.

Keep in mind that using margin increases risk. This article explains what is buying power in stocks and how to think about it; it is informational and not investment advice. For exact figures and rules, refer to your brokerage account agreement and platform disclosures.