However, there is one caveat; this is only for intraday positions. For overnight positions, the margin requirement is double – 2:1.
Increasing the requirement makes sense because the brokerage firm would not want overnight exposure where a stock could gap up or down due to a news event.
Buying Power for Different Markets
The concept of buying power is a bit more complicated for options and comes down to the top of options trade you are placing.
Long options, for example, are short term in nature and due to the time decay do not have any loan value.
Check out this full table from TD Ameritrade which covers the various options requirements. Please note, it can get a bit complicated, so you will need to really understand what is required from you based on the amount of cash and trade type.
Forex which trades over the counter can have buying power as high as 50 to 1.
This buying power can vary from one brokerage to another.
Futures margin requirements are not as loose as Forex but runs a close second. You only need on average between 5% to 15% of cash on hand for your total position.
Check out this table from Daniels Trading which provides a list of requirements by futures type. What I really like about this table is the fact the broker calls out the initial margin requirement, maintenance requirements and then the daily requirement.
Risks of Trading on Margin
Using margin can be risky.  Most retail traders only think of margin as a tool to increase their profits.
They do not think of margin as a means to hedge against an open position.
Imagine if a trader goes all-in on a day trade with four times margin and the stock goes against them by 5%.
This would mean that trader just took a 20% hit on their total portfolio on one trade.
Hence, trading with margin is not for beginners.
While there are proper checks in place to ensure that you do not end up losing more than what you invested (including margin), it is not always that case.
The buying power in the markets are best used in moderation and a trader shouldn’t even think about utilizing all of the buying power simply because it is available.
How Can Tradingsim Help?
Tradingsim currently has equities and futures in the platform. You can practice trading these security types to ensure you are able to stay within the set margin requirements.
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