The total dollar amount of positions a trader can open based on their account balance and available margin. Buying power is determined by the account size, margin requirements, and any position size limits set by the prop firm.
Why It Matters
- 1Buying power determines how many contracts you can trade simultaneously and is distinct from your account balance.
- 2In futures trading, margin requirements mean your buying power can be many times your account balance.
- 3A $100,000 prop firm account with $500 intraday margin per ES contract gives you the ability to hold up to 200 contracts theoretically — but the firm's max position size limit typically restricts you to 10-20 contracts.
- 4Understanding the difference between available buying power and appropriate position sizing is crucial for risk management.
Example
- 1Your $100,000 prop firm account has an intraday margin requirement of $500 per ES contract, giving you a theoretical buying power of 200 contracts.
- 2However, the firm limits you to 12 contracts maximum.
- 3Even within that 12-contract limit, proper risk management might dictate only using 3-5 contracts per trade.
- 4Your usable buying power is limited by the strictest of: margin, firm limits, and your personal risk rules.
Common Mistakes
- ✖Confusing buying power with how much you should actually trade
- ✖Maxing out buying power and having no margin cushion for adverse moves
- ✖Not understanding that buying power changes between regular trading hours and overnight sessions