What is Day Trading Buying Power?
Day Trade Buying Power, or DTBP, is the amount available to the investor to use for day trades. A day trade is considered as the buying and selling of the same stock, ETF, or option in the same business day.
You are considered a pattern day trader if you have exceeded 3 or more day trades in a consecutive 5 business day period. In order to continue to trade, after being flagged as a pattern day trader, you must maintain a minimum account balance of $25,000. The $25,000 does not include bond accounts, High Yield Cash Accounts, JIKO treasury accounts, or crypto.
If you maintain balances in equities and cash over $25,000, you are able to day-trade in the amount up to your day trading buying power.
DTBP is calculated using a multiple on your account’s margin available, or the regulatory maintenance excess of margin, or margin available, based on the previous day’s close. The maintenance margin excess is the amount by which the equity held in the margin account exceeds the required minimum. Generally, the DTBP is four times, or 4X the regulatory maintenance margin excess.
For example, if your margin account holds shares of marginable security worth $50,000, the margin available is $25,000, and the DTBP would be $100,000 ($25,000 × 4). If your account holds $30,000 in cash, not held in a cash sweep, the margin excess is $30,000 and the DTBP would be $120,000 ($30,000 x 4).
Margin Account Balance | $50,000 ABC |
Margin Requirements | $25,000 |
Margin Excess | $25,000 |
DTBP | $100,000 |
At the start of day, you can find your initial day trading buying power on the ‘Margin Management’ screens. If you make a large deposit or sale during the day, this will not increase your day trade buying power until the subsequent market day.
If you exceed your DTBP, a day trade margin call is issued. Learn more about Day Trade Calls here.