Glossary term
Buying power
Definition
A leveraged figure that looks like cash. Studying a size against it makes a small idea look cheaper than it is. Not powder.
How it works
Buying power is the largest order a broker would currently let an account place. It combines the account's own cash with what the broker would lend against its holdings, so it is a capacity, not a balance. It is not a second pile of money next to your cash; it already contains your cash.
The multiple is set by the lender, not by anything about your wealth. In the classroom book $10,000 of settled cash supports $24,000 of buying power, a ratio of 2.4 times. That ratio is a lending policy and can change when the lender's risk view changes, which tends to be the moment you least want your capacity to shrink.
Worked example
Commit $8,000 and describe it two ways. Against buying power, $8,000 ÷ $24,000 = 33.3%, which sounds like a third of capacity. Against settled cash, $8,000 ÷ $10,000 = 80%, which is most of the real cash.
Both statements are arithmetically correct and only one tells you how much of your own money is spent. After the commitment the remaining powder is $10,000 − $8,000 = $2,000. The "$16,000 left" implied by the buying-power view is entirely borrowed. Adding the figures together makes it worse: $10,000 + $24,000 = $34,000 counts the same $10,000 twice.
Hypothetical, for education only. Not a recommendation and not a prediction.
Common mistake
The mistake is sizing against buying power because it is the biggest number on the screen. It makes a position look about 2.4 times smaller than it is relative to the money actually held, and it does so consistently, which is worse than an occasional error. The figure is a correct answer to a different question, how large an order could be placed, and a wrong answer to the question people ask of it, how much do I have.