Buying power is calculated differently depending on your account type: in a cash account it equals your settled cash, in a standard margin account it equals your excess equity multiplied by two under Regulation T, and in a pattern day trading account it can reach four times your prior-day maintenance margin excess for positions opened and closed the same day. The formula that applies to you depends on how your account is classified, what you are buying, and whether you already carry a margin loan. Here is how each calculation actually works.
Cash Accounts: Settled Cash Only
A cash account uses the simplest formula there is. Your buying power equals your settled cash balance. If $15,000 has settled in the account, you can buy $15,000 worth of securities. When you sell a holding, the proceeds add back to buying power once they settle, which under the current T+1 cycle is typically one business day for most securities.
There is no borrowing and no leverage in a cash account, so the formula never involves anything beyond what you actually have on hand.
Standard Margin Accounts: Excess Equity Times Two
Margin accounts introduce borrowed money into the calculation, and the baseline rule comes from the Federal Reserve Board’s Regulation T. Reg T requires you to put up at least 50 percent of the purchase price for most equity securities from your own funds; the broker can lend you the other 50 percent.1eCFR. 12 CFR 220.12 – Supplement: Margin Requirements That 50 percent floor is what produces the standard 2:1 buying power most retail margin accounts advertise.
To calculate the number, you need one figure: your excess equity, meaning the equity sitting above what Reg T already requires you to hold against your current positions. Multiply excess equity by two and you have your buying power.2SEC.gov. Investor Bulletin: Understanding Margin Accounts
A Worked Example With No Margin Loan
Suppose your account holds $30,000 in stock and you owe nothing. Reg T requires 50 percent of that position, or $15,000, to be covered by your own money. Your excess equity is $30,000 minus $15,000, or $15,000. Multiply by two and your buying power is $30,000.
A Worked Example With an Existing Margin Loan
Now assume the same $30,000 in stock, but you already owe $10,000 on a margin loan. Your equity is $20,000 (market value minus debt). Reg T still requires 50 percent of the $30,000 position, or $15,000. Your excess equity drops to $5,000, giving you $10,000 in buying power.
Both examples assume you are buying marginable securities. Buy something non-marginable and the leverage disappears for that purchase, putting you back at 1:1.
Not Every Security Generates Leverage
The 2:1 math only applies to securities your broker treats as marginable. Several common categories do not qualify and require full cash payment:
- Stocks trading below $5 per share generally cannot be bought on margin.
- Newly issued stocks are typically non-marginable during their first 30 days of trading.
- Mutual funds purchased within the last 30 days are non-marginable until that window passes.
Most trading platforms flag whether a security is marginable on the order entry screen or in the position details. When you buy something that is not marginable, only your available cash counts toward the purchase, and the position itself contributes no borrowing capacity to your account.
Maintenance Requirements Shrink Buying Power in Real Time
The 50 percent rule governs the initial purchase. Once you hold the position, a separate maintenance requirement takes over. FINRA Rule 4210 requires equity equal to at least 25 percent of the market value of long stock positions, and 30 percent of market value (or $5 per share, whichever is greater) for short positions in stocks priced at $5 or above.3Financial Industry Regulatory Authority. 4210 Margin Requirements
Those are regulatory minimums. Brokers are allowed to set higher “house” requirements and routinely do, sometimes 30 or 40 percent on long positions and even more on volatile individual stocks.3Financial Industry Regulatory Authority. 4210 Margin Requirements The house requirement is the one that actually controls your day-to-day buying power, because your broker enforces whichever threshold is stricter.
When equity drops below the maintenance requirement, you receive a margin call demanding additional cash or securities. If you do not meet the call, the broker can liquidate holdings without asking which positions you would prefer to sell, and you remain responsible for any shortfall. Maintenance requirements are what turn buying power from an abstract formula into live financial exposure, because they tighten as prices fall.
Day Trading Buying Power: Four Times Maintenance Excess
If you execute four or more day trades within five business days, and those trades make up more than 6 percent of your total activity in the margin account over that period, FINRA classifies you as a pattern day trader.4Financial Industry Regulatory Authority. Regulatory Notice 24-13 Two things change the moment that label applies.
First, you must maintain at least $25,000 in equity in the margin account on any day you place a day trade. The equity can be a mix of cash and marginable securities, but it must be in the account before you trade, not deposited afterward.5FINRA. Day Trading Fall below $25,000 and day trading is blocked until the balance is restored.
Second, your day trading buying power jumps to four times your maintenance margin excess as of the prior day’s close.5FINRA. Day Trading If yesterday’s statement shows $20,000 in maintenance excess, you have $80,000 of intraday buying power the next morning. That 4:1 figure only applies to positions opened and closed the same day. Anything held overnight reverts to Reg T’s 50 percent initial margin, limiting overnight exposure to 2:1.1eCFR. 12 CFR 220.12 – Supplement: Margin Requirements Accidentally holding an oversized day trade past the close is one of the quickest ways to generate a margin call.
Exceeding your day trading buying power triggers a special margin call. You have five business days to deposit enough to cover the deficiency, and until you do, your day trading buying power is cut in half to 2x maintenance excess. Miss the deadline and the account is restricted to cash-only trading for 90 days.6Financial Industry Regulatory Authority. Pattern Day Trader Interpretation RN 21-13
The Special Memorandum Account
Alongside your margin account, the brokerage keeps a ledger called the Special Memorandum Account, or SMA. It tracks the Reg T credit available to you, running a tally of excess equity, dividends, cash deposits, and sale proceeds that exceed your current margin requirements.7eCFR. 12 CFR 220.5 – Special Memorandum Account
The SMA has one quirk worth knowing about: it rises when your portfolio rises, but it does not fall when your portfolio falls. That means buying power calculated from SMA can at times exceed what current portfolio equity alone would support. The SMA is a Reg T credit line, not a maintenance safety gauge, so a healthy SMA balance will not warn you about a maintenance call brewing in the same account.
Portfolio Margin: A Risk-Based Formula for Large Accounts
Investors with large accounts and options approval can switch to portfolio margin, which replaces Reg T’s fixed percentages with a risk-based model. Instead of 50 percent initial margin on every stock position, portfolio margin estimates the worst-case loss across market scenarios, typically modeling moves of about 15 percent up and down on equities.
The result is more buying power on diversified or hedged portfolios. A long stock position that would require $5,000 under Reg T might require only around $750 under portfolio margin, because the risk model recognizes the realistic 15 percent downside is far less than 50 percent of the position’s value.
The entry requirements are substantial. FINRA requires at least $100,000 in account equity when the broker has full real-time monitoring, and up to $500,000 if the monitoring systems are less robust. Accounts that include unlisted derivatives or day trade under portfolio margin may need $5 million.8FINRA. Guide to Updated Interpretations of FINRA Rule 4210 You also need approval for uncovered options trading before a broker will enable it. The added leverage cuts both ways, because the required margin recalculates in real time as your positions’ risk profiles shift.
Margin Interest Reduces What You Actually Keep
Every dollar of margin buying power you use is borrowed, and brokers charge interest daily on the end-of-day debit balance. Rates at major brokerages ran roughly 10 to 12 percent in late 2025 depending on balance size, with the spread tightening as balances grow.
On a $50,000 margin loan at 11 percent, that works out to about $15 a day, or over $450 a month, accruing whether your positions gain or lose. For buying power calculations, the interest is not part of the formula, but it is part of the real economics: the longer you hold a leveraged position, the more the loan cost eats into the return the leverage was meant to amplify.