What buying power means on Robinhood

Buying power is the amount of money you can use to buy stocks, options, or other investments on Robinhood right now. It is not the same as your account balance. Your buying power includes cash you have deposited plus money you can borrow through margin, minus any funds that are held or already committed to other trades.

When you see your buying power on the Robinhood app, that number tells you the maximum you can spend on a new purchase at that moment. If your buying power is $5,000, you can buy up to $5,000 worth of securities. If you try to buy more than your buying power allows, the order will be rejected.

Buying power changes throughout the day as you make trades, as deposits settle, and as the value of stocks you own rises or falls. Understanding what affects it helps you avoid rejected orders and unexpected margin calls.

Key Takeaways

  • Buying power includes your cash balance plus any available margin, minus money already held for pending trades or settled positions.
  • Cash deposits take one to two business days to settle and become part of your buying power; unsettled cash cannot be used to buy stocks.
  • Margin allows you to borrow money to buy more than your cash alone would cover, but you pay interest and risk a margin call if your account value drops.
  • Selling a stock frees up buying power immediately, but the cash from that sale takes one to two business days to settle before you can withdraw it.
  • Day trading rules limit how many times you can buy and sell the same stock within five business days if your account is under $25,000.

How cash deposits affect your buying power

When you transfer money into Robinhood, that money does not become part of your buying power right away. Robinhood must wait for the transfer to clear from your bank, which typically takes one to two business days. During that time, the cash shows in your account but is marked as "unsettled" and cannot be used to buy stocks.

Once the deposit settles, it becomes available buying power. If you have a Robinhood Gold subscription (which gives you margin), settled cash also counts toward your margin limit. Without margin, your buying power equals only your settled cash balance.

Weekends and bank holidays extend settlement time. A deposit made on Friday afternoon may not settle until Tuesday. Plan ahead if you want to buy on a specific day.

Understanding margin and borrowed money

Robinhood offers margin through its Gold subscription, which lets you borrow money to buy stocks beyond what your cash balance covers. If you have $2,000 in cash and $2,000 in available margin, your buying power is $4,000. You can spend that full amount, but you owe interest on the $2,000 you borrowed.

Margin interest rates vary and are charged daily on the borrowed amount. Robinhood displays the current rate in the app. The longer you hold a margin position, the more interest you pay. If you sell the stock and pay back the borrowed money quickly, interest costs stay low.

Margin comes with risk. If the value of stocks you bought on margin falls sharply, Robinhood can issue a margin call, requiring you to deposit more cash or sell positions to bring your account back into compliance. If you do not respond, Robinhood will sell your stocks without asking you first to cover the shortfall.

How trades and pending orders reduce buying power

When you place an order to buy a stock, Robinhood reserves that money from your buying power immediately, even before the order fills. If you have $10,000 in buying power and you place an order to buy $3,000 worth of a stock, your available buying power drops to $7,000 right away. If that order is cancelled, the $3,000 is released back to you.

Once an order fills, the stock appears in your portfolio and the cash is no longer part of your buying power. Instead, the value of that stock counts toward your total account value. If the stock price rises, your buying power may increase because your account is worth more. If it falls, your buying power decreases.

Selling a stock frees up buying power instantly, but the cash from the sale does not settle for one to two business days. You can use that unsettled cash to buy other stocks immediately, but you cannot withdraw it until it settles.

Day trading rules and buying power limits

Robinhood enforces the Pattern Day Trader rule, a federal regulation that limits how often you can buy and sell the same stock within five business days. If your account has less than $25,000, you are limited to three day trades in a five-business-day window. A day trade is any buy and sell of the same stock on the same day.

When you hit this limit, Robinhood restricts your buying power to settled cash only — you cannot use margin to buy until the five-day window closes. This restriction can significantly reduce what you can spend. If you have $5,000 in settled cash but $10,000 in margin available, you can only use the $5,000 until the restriction lifts.

Accounts with $25,000 or more are not subject to this limit and can day trade freely. Many traders keep their accounts above this threshold specifically to avoid the restriction.

What happens when buying power runs out

If you try to buy more than your available buying power, Robinhood rejects the order with a message saying you do not have enough buying power. The order does not go through, and no money is charged. You must either wait for a deposit to settle, sell an existing position to free up cash, or reduce the size of your order.

If you are on margin and your account value drops below Robinhood's maintenance requirement, you will receive a margin call. Robinhood sends a notification and gives you a deadline (usually the same day or next business day) to deposit cash or sell positions. If you do not act, Robinhood sells your stocks automatically to bring the account into compliance.

Margin calls are costly because you lose control of which stocks are sold, and you may sell at a bad time. Avoiding margin calls means monitoring your account value regularly and keeping a cash cushion if you use margin.

How stock price changes affect buying power

Your buying power is tied to your total account value, which changes as stock prices move. If you own 100 shares of a stock worth $50 each and the price rises to $55, your account value increases by $500. That extra $500 becomes available buying power (if you are not on margin with a maintenance requirement).

The reverse is also true. If the stock falls to $45, your account value drops by $500, and your buying power decreases by the same amount. This is why buying power can fluctuate significantly on volatile trading days, even if you do not make any trades yourself.

On margin, stock price changes matter even more because they determine whether you stay above the maintenance requirement. A sharp drop in your holdings can trigger a margin call, even if you have not borrowed much money.

Frequently Asked Questions

Why does my buying power show a different number than my cash balance?

Buying power includes margin (borrowed money) if you have a Gold subscription, and it excludes any cash held for pending trades or unsettled deposits. Your cash balance shows only the money you have deposited; buying power shows what you can actually spend right now.

Can I use unsettled cash to buy stocks?

Yes. Robinhood lets you buy stocks with unsettled cash immediately after you deposit it, even though the deposit has not cleared your bank yet. However, you cannot withdraw unsettled cash, and if you sell stocks bought with unsettled cash before the deposit settles, you may trigger a "good faith violation" that restricts your account.

What is the difference between buying power and account value?

Account value is the total worth of everything in your account — cash plus stocks. Buying power is how much you can spend on new purchases right now. A $10,000 account value does not mean you have $10,000 in buying power if some of that is tied up in stocks or if you are on margin with a maintenance requirement.

Does selling a stock increase my buying power right away?

Yes, selling increases your buying power immediately because the cash is reserved for you. However, that cash does not settle for one to two business days, so you cannot withdraw it until settlement is complete. You can use it to buy other stocks right away.

What happens if I run out of buying power mid-trade?

Robinhood rejects the order and sends you an error message. The order does not go through, and you are not charged. You must wait for a deposit to settle, sell a position, or place a smaller order within your available buying power.