Definition of Buying power:
While buying power can take on a different meaning depending on the context or industry, in finance, buying power refers to the amount of money available for investors to purchase securities in a leveraged account. This is referred to as a margin account, as traders take out a loan based on the amount of cash held in their brokerage account. Regulation T, established by the Federal Reserve Board (FRB), mandates that a investor’s initial margin requirement in this account type must be at least 50%, meaning the trader has two times buying power.
Buying power, also referred to as excess equity, is the money an investor has available to buy securities in a trading context. Buying power equals the total cash held in the brokerage account plus all available margin.
An assessment of an individuals or organizations disposable income regarded as conferring the power to make purchases.
How to use Buying power in a sentence?
- Buying power equals the total cash held in the brokerage account plus all available margin.
- A pattern day trading account provides four times equity in buying power.
- A standard margin account provides two times equity in buying power.
- Additional buying power magnifies both profits and losses.
- Buying power is the money an investor has available to purchase securities.
Meaning of Buying power & Buying power Definition