Buying Power Calculator
Print| Maximum Borrowed Margin ($) | $0.00 |
The Buying Power Calculator computes the total dollar value of securities an investor can purchase in a brokerage account based on cash equity, held positions, and Federal Reserve Regulation T margin requirements. Buying power measures your total purchasing capacity including broker-extended leverage.
Calculating your exact buying power prevents accidental margin calls, helps manage position sizing, and ensures compliance withFINRA pattern day trader (PDT) maintenance requirements.
Buying Power Formulas
Buying power rules vary based on account type, holding timeframe (overnight vs. day trade), and margin requirements:
1. Cash Account Buying Power
Cash Buying Power = Settled Cash Balance
2. Standard Reg T Margin Account (Overnight Holdings)
Overnight Buying Power = Cash Equity / Initial Margin Requirement %
At standard 50% Regulation T initial margin requirement:
Overnight Buying Power = Cash Equity × 2
3. Pattern Day Trader (PDT) Day Trading Buying Power
Day Trading Buying Power = Maintenance Margin Excess × 4
Account Type Leverage & Buying Power Matrix
Different brokerage account designations offer varying leverage multipliers and regulatory margin limits:
| Account Designation | Leverage Multiplier | Margin Requirement & Trading Rules |
|---|---|---|
| Cash Account | 1.0x (No Leverage) | 100% cash required. Trades subject to T+1 settlement rules. Zero margin interest or liquidation risk. |
| Standard Reg T Margin | 2.0x (2:1 Leverage) | 50% initial margin requirement for overnight position holds. Subject to 25% FINRA maintenance margin. |
| Pattern Day Trader (PDT) | 4.0x (4:1 Intraday) | Requires $25,000 minimum equity. Applies strictly to positions opened and closed within the same trading session. |
| Portfolio Margin Account | 6.0x to 8.0x (Risk-Based) | Requires $110,000+ equity. Margin calculated using theoretical risk stress testing (TIMS) across hedged portfolios. |
Step-by-Step Buying Power Calculation Example
Consider an active stock trader with a margin account containing $30,000 in settled cash equity:
- Account Cash Equity: $30,000
- Reg T Initial Margin Requirement: 50%
- PDT Intraday Requirement: 25%
Step 1: Compute Overnight Buying Power (2:1)
Overnight Buying Power = $30,000 / 0.50 = $60,000
Step 2: Compute Day Trading Buying Power (4:1)
Day Trading Buying Power = $30,000 × 4 = $120,000
Result: The trader can hold up to $60,000 in stock overnight or enter up to $120,000 in intraday day trades before exceeding margin limits.
Frequently Asked Questions (FAQ)
What is the difference between Account Equity and Buying Power?
Account equity is the actual net liquidation value of your cash and held securities. Buying power includes the extra leverage extended by your broker using margin collateral.
What triggers a Margin Call?
A margin call occurs when total account equity falls below the broker’s Maintenance Margin Requirement (typically 25% – 30% of total position value), requiring immediate cash deposits or asset liquidation.
What is the Pattern Day Trader (PDT) rule?
FINRA rules classify any margin account executing 4 or more day trades within a 5-business-day rolling period as a Pattern Day Trader. PDT accounts must maintain a minimum $25,000 equity balance to retain 4x day trading buying power.
Do leverage buying power purchases incur interest?
Intraday day trades closed before market end incur zero interest charges. Any margin leverage held overnight incurs annual margin interest charged daily by the brokerage.