A:

When looking at some online brokerage accounts, there are a few figures that may be confusing, including account value, cash value and purchasing power.

The first figure, account value or total equity, is the total dollar value you have in your trading account. This number is calculated by adding the total amount of cash you have within your account and the current market value of all securities, and then subtracting the market value of any stocks that are shorted. It is essentially the worth of all your positions if they were to be liquidated at the point in time the number is calculated.

The second figure, cash balance value, is the total amount of cash you have available to use. This is the amount that you are able to immediately withdraw or the total amount available to purchase securities in a cash account.

The final figure, buying power, is the total amount available to purchase securities. This amount includes both the available cash on hand along with any available margin. The buying power figure is a better representation of how much money is available for trading, and its amount will depend on the type of account you have. If you have a margin account, then your purchasing power almost always will be greater than your cash value.

To learn more about margins, see the Margin Trading tutorial or read The Advantages of SPAN Margin.

RELATED FAQS
  1. What does it mean when the shares in my account have been liquidated?

    An account liquidation occurs when the holdings of an account are sold off by the firm in which the account was created. ... Read Answer >>
  2. What does it mean when I get a maintenance margin call?

    Understand how maintenance margin calls work, and learn about how margin requirements are different for trading stock versus ... Read Answer >>
  3. What does it mean when I get a Fed margin call?

    Learn what a fed margin call is, what it means when you receive one and what steps you must take to satisfy the fed's requirements ... Read Answer >>
  4. What are the minimum margin requirements for a short sale account?

    In a short sale transaction, the investor borrows shares and sells them on the market in the hope that the share price will ... Read Answer >>
Related Articles
  1. Trading

    Introduction to Margin Accounts

    Find out what your broker is doing with your securities when you invest on margin.
  2. Financial Advisor

    Understanding the Maintenance Margin

    A maintenance margin is the minimum amount of equity that must be kept in a margin account.
  3. Investing

    Buying on Margin

    When an investor buys on margin, he or she pays a portion of the stock price – called the margin -- and borrows the rest from a stockbroker. The purchased stocks then serve as collateral for ...
RELATED TERMS
  1. Buying Power

    The money an investor has available to buy securities. In a margin ...
  2. Cash Trading

    A method of buying or selling securities by providing the capital ...
  3. Free Credit Balance

    The cash held by a broker in a customer's margin account that ...
  4. Trading Margin Excess

    The funds that remain in a margin trading account that are available ...
  5. Remargining

    The process of bringing an account up to minimum equity standards ...
  6. Current Market Value - CMV

    The resale valuation attached to a security held long in an investor's ...
Hot Definitions
  1. North American Free Trade Agreement - NAFTA

    A regulation implemented on Jan. 1, 1994, that decreased and eventually eliminated tariffs to encourage economic activity ...
  2. Trickle-Down Theory

    An economic idea which states that decreasing marginal and capital gains tax rates - especially for corporations, investors ...
  3. Derivative

    A security with a price that is dependent upon or derived from one or more underlying assets.
  4. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  5. Sharpe Ratio

    The Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such ...
  6. Death Taxes

    Taxes imposed by the federal and/or state government on someone's estate upon their death. These taxes are levied on the ...
Trading Center