Non-margin buying power is the dollar amount of securities you can buy using only settled cash you already own, with no borrowed money involved. The calculation is straightforward: take the settled cash in your brokerage account and subtract anything reserved for pending buy orders. If your account shows $15,000 in settled cash and you have a $3,000 limit order working, your non-margin buying power is $12,000. That figure is the money you can trade with while carrying zero risk of interest charges, margin calls, or the settlement-timing violations that catch active cash-account traders.
What Counts as Settled Cash
Settled cash comes from two sources. The first is cleared deposits from a bank. ACH transfers typically take around four business days to settle, though many brokers extend provisional buying power sooner so you can start trading before the transfer fully clears. Wire transfers generally settle faster, often the same or next business day. Until a deposit actually settles, any buying power your broker grants against it is a courtesy rather than settled cash.
The second source is proceeds from securities you have sold, but only after those trades have completed the settlement cycle. Selling 100 shares on Monday generates cash, and that cash is not considered fully settled until the settlement date arrives. Your broker may let you use it provisionally in the meantime, but in the strictest sense it is not yet part of your non-margin buying power.
Pending buy orders come off the top the moment you place them. A $5,000 limit order sitting on the books reserves $5,000, so you can’t accidentally commit the same dollars to two different trades. Cancel the order or let it expire, and the reserved amount returns to your buying power right away. If it fills, that cash is spent.
How Settlement Timing Changes What You Can Spend
Since May 28, 2024, the standard settlement cycle for U.S. stocks, bonds, ETFs, municipal securities, and certain mutual funds has been T+1: one business day after the trade date.1Investor.gov. New T+1 Settlement Cycle – What Investors Need To Know Sell stock Monday morning and the proceeds settle by the close of business Tuesday. The SEC shortened the cycle from T+2 to reduce risk in the system and free up capital faster.2Securities and Exchange Commission. Shortening the Securities Transaction Settlement Cycle Options and government securities already ran on a next-day schedule, so T+1 brought equities into line with those markets.3Financial Industry Regulatory Authority. Understanding Settlement Cycles – What Does T+1 Mean for You
The one-day gap still matters for your buying power. Sell a stock Tuesday morning and immediately buy something else with those proceeds Tuesday afternoon, and you are technically spending unsettled funds. Most brokers allow this as a good-faith courtesy, but the original cash does not officially settle until Wednesday. The distinction between “your broker lets you use it” and “it is actually settled” is where trouble starts.
Violations That Restrict a Cash Account
Three kinds of trading violations can lock down your cash account, each triggered by a different way of misusing unsettled funds. Regulation T sets the ground rules for cash-account discipline.4eCFR. 12 CFR 220.8 – Cash Account
Good Faith Violations
A good faith violation happens when you buy a security using unsettled funds and then sell that security before the funds you used to buy it have settled. You sell Stock A on Monday, use the unsettled proceeds to buy Stock B on Monday, then sell Stock B before Stock A’s proceeds settle on Tuesday. You traded on money you did not fully own yet.
Brokers track these on a rolling 12-month basis. A common industry practice is to restrict the account after three good faith violations within 12 months, imposing a 90-calendar-day period during which you can only buy securities with fully settled cash already sitting in the account.
Cash Liquidation Violations
This is the mirror image. You buy a security, then sell other holdings after the purchase date to raise the cash to cover it. If the sale of those other holdings does not settle in time to pay for the original purchase by its settlement date, you have funded a buy with cash that was not there when it needed to be. Three of these in 12 months typically triggers the same 90-day settled-cash-only restriction.
Freeriding
Freeriding is the most serious. You buy a security and sell it before ever depositing enough money to pay for the purchase, effectively using the sale proceeds to fund the original buy. Regulation T addresses this directly: if a security is sold without having been previously paid for in full, the privilege of delayed payment is withdrawn for 90 calendar days.4eCFR. 12 CFR 220.8 – Cash Account Unlike good faith violations, a single freeriding violation triggers the 90-day freeze right away.5Investor.gov. Freeriding
During any 90-day restriction, you can still trade, but every purchase must be covered by settled cash already in the account when you place the order. The simplest way to avoid all three violations is to wait for sale proceeds to settle before reusing them. Under T+1, that is one business day of patience.
How This Differs From Margin Buying Power
The core difference is where the money comes from. Non-margin buying power draws only from cash you own outright. No loan, no leverage, no interest clock. Margin buying power adds in the funds your broker is willing to lend you against the securities you hold.
The Federal Reserve Board’s Regulation T sets the initial margin requirement at 50% for most equity purchases, so a broker can lend you up to half the purchase price of a stock when you buy on margin.6FINRA. Margin Regulation After the position is open, FINRA requires your account equity to stay at or above 25% of the position’s current market value, and many firms set house requirements higher than that.7FINRA. FINRA Rule 4210 – Margin Requirements If the stock drops far enough, you get a maintenance call demanding more cash or a forced sale.
None of that applies when you stick to non-margin buying power. No interest accrues, no margin calls arrive, and the most you can lose is the cash you put in.
Non-Margin Buying Power in Retirement Accounts
IRAs, Roth IRAs, SEP IRAs, and similar retirement accounts cannot use traditional margin, because federal tax rules prohibit borrowing against retirement assets. Every purchase in a standard retirement account must be funded with cash, so non-margin buying power is the only buying power that exists in these accounts.
Some brokers offer a feature called limited margin for IRAs. Despite the name, it does not let you borrow, sell short, or take leveraged positions. It lets you trade with unsettled sale proceeds immediately, sidestepping the good faith violation risk that cash accounts face. Limited margin does make the IRA subject to pattern day trader rules, which include a $25,000 equity minimum for accounts flagged as pattern day traders, and annual IRA contribution limits cap how quickly you can restore that balance if you fall below it.
Day Trading With Non-Margin Buying Power
Cash accounts are exempt from the pattern day trader designation and its $25,000 equity requirement, which is a real advantage for smaller accounts. Exempt from PDT rules is not the same as free to day trade without limits, though. Settlement mechanics impose their own ceiling.
Every purchase in a cash account needs settled funds, and every sale takes one business day to settle. Start the morning with $10,000 in settled cash, buy $10,000 of stock, and your non-margin buying power drops to zero. Sell that stock an hour later for $10,200 and you now have $10,200 in unsettled proceeds. You can use those proceeds to make another purchase under good-faith rules, but you cannot sell that new position until the original $10,200 settles the next business day without risking a good faith violation.
In practice, a cash account limits you to about one full round trip per pool of settled cash per day. Traders who want multiple round trips in a single session either need enough settled cash to fund each trade independently or need a margin account. Once the non-margin buying power figure on your screen hits zero, you are done for the day unless you are willing to work around settlement timing and risk violations.
For investors who trade a few times a week rather than a few times a day, cash accounts work well. Yesterday’s sale proceeds are available today under T+1, so your buying power refreshes overnight, and the discipline of spending only settled cash keeps you from overextending.