Brokers require you to keep a certain percentage of equity in your account (usually 25% or higher). If you dip below this, you’ll face a margin call , where your buying power hits zero (or goes negative), and you're forced to deposit cash or sell assets.
This is where things get more powerful—and more dangerous. A margin account allows you to borrow money from your broker to buy more stock than you could with your own cash.
is essentially the total amount of money you have available to purchase securities. Think of it as your "spending limit" at the brokerage mall. stock buying power
If the stocks you already own drop in value, your equity decreases. Because your borrowing limit is tied to your equity, your buying power drops too.
If you put all your money into one "risky" or volatile stock, a broker might reduce your leverage, effectively lowering your buying power to protect themselves from a total wipeout. The Bottom Line Brokers require you to keep a certain percentage
Your buying power isn't a static number. It changes based on:
AI responses may include mistakes. For financial advice, consult a professional. Learn more A margin account allows you to borrow money
When you sell a stock, the money doesn’t always become "buying power" instantly. Most trades take one business day to "settle" (T+1). If you buy more stock using "unsettled" funds and sell it too quickly, you could trigger a Good Faith Violation . 2. Margin Account Buying Power