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's the difference between a cash account and a margin account?

    Compare and contrast margin and cash accounts. Margin accounts offer short-term loans, leverage on existing portfolios, and ... Read Answer >>
  3. How much can I borrow with a margin account?

    Understand the basics of margin accounts and buying on margin, including what amount investors can typically borrow for purchases ... Read Answer >>
  4. What happens if I cannot pay a margin call?

    Minimum margin is the amount of funds that must be deposited with a broker by a margin account customer. With a margin account, ... Read Answer >>
  5. How exactly does buying on margin work and why is it controversial?

    Learn how purchasing stock on margin works, and understand the risk associated with margin accounts that make the strategy ... Read Answer >>
  6. 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 >>
Related Articles
  1. Trading Strategies

    Simulator How-To Guide: Margin Accounts

    Although we've used virtual cash so far in our How-To Guide, we've dealt with investing from the perspective of an investor trading stock with his/her own money. However, there's ...
  2. Options & Futures

    Margin Trading: What Is Buying On Margin?

    The Basics Buying on margin is borrowing money from a broker to purchase stock. You can think of it as a loan from your brokerage. Margin trading allows you to buy more stock than you'd be able ...
  3. Active Trading Fundamentals

    Introduction to Margin Accounts

    Find out what your broker is doing with your securities when you invest on margin.
  4. Options & Futures

    Pick the Right Brokerage Account for Options Trading

    Follow these steps to pick the right options brokerage account depending on your trading needs and style of trading.
  5. Options & Futures

    Margin Trading: The Dreaded Margin Call

    In the previous section, we discussed the two restrictions imposed on the amount you can borrow. First, the initial margin, which is the initial amount you can borrow. Second, the maintenance ...
  6. Professionals

    Margin Accounts

    Margin Accounts
  7. Professionals

    Account Types

    NASAA Series 65: Section 17 Account Types. In this section types of brokerage accounts and commissions.
  8. Investing

    Cheap Stocks Or Value Traps?

    The value of stocks that trade at less than cash per share can be deceiving.
  9. Term

    Understanding the Maintenance Margin

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

    Cash and Margin Accounts

    FINRA Series 6: Section 12 Cash and Margin Accounts. This section is regarding Cash Account, Margin Account, Regulation T and required documentation such as credit, hypothecation and loan consent ...
RELATED TERMS
  1. Buying Power

    The money an investor has available to buy securities. In a margin ...
  2. Margin Loan Availability

    1. The dollar amount in an existing margin account that is currently ...
  3. Margin Account

    A brokerage account in which the broker lends the customer cash ...
  4. Cash Trading

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

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

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

You May Also Like

Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center