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. When using margin, your buying power for different stocks varies because each stock has different margin maintenance requirements.
Cash Account:
In a cash account, the amount of free cash is your buying power. You cannot borrow funds to place trades.
Margin Account:
In a margin account, there are two kinds of buying power: Day-Trade Buying Power (DTBP) and Overnight Buying Power (ONBP).
Day Trade Buying Power refers to the amount available to day trade for the day. Day-trade buying power is equal to the equity in your account at the close of business on the previous day, less the Self-Regulatory Organization (SRO) requirements, multiplied by up to four. Each security will have an SRO requirement, which is based on the exchange minimums allowed.
Overnight buying power refers to the money available to buy securities and hold the position overnight. In the majority of cases, this amount is simply double the cash on hand.
Margin trading is only available for margin accounts with no less than $2,000 net account value.