Buying Power

Buying power refers to the amount of money you have available in your account to buy equities. When you buy equities your buying power goes down. When you sell equities your buying power goes up.

In margin accounts you are able to borrow money in order to invest in equties, you only need to put 50% down to begain with. So if you have a $5,000 account in a margin account your buying power for stock is doubled to $10,000.

You can’t use margin for options because they are riskier. If you have $5,000 in your account you only have an option buying power of $5,000, even with a margin account.

Most new traders like to invest their full account at one time. But it can be useful to keep some of your money in reserves, especially during volatile times in the market.