When you’re day trading, you must have the buying power you need to succeed. This means having enough cash to buy the stocks you want when the opportunity arises. This lesson will discuss tips for building up your day trading buying power to make more money in the stock market!
What is Buying Power?
Buying power is the amount of cash you have to buy stocks. This is important for day traders because it allows them to buy more stocks when the opportunity arises. You can do a few things to build up your buying power, including using leverage and saving cash. Be careful with leverage, though, as it can lead to more significant losses if the market moves against you.
Buying Power for Stock Traders
If you’re a stock trader, you need to have the buying power to buy stocks when the opportunity arises. Here are a few tips to help you build up your buying power:
Use Leverage: As mentioned, leverage is an excellent tool for increasing buying power. Using leverage, you can control more stock shares without putting up all the cash yourself. Be careful with leverage, though, as it can lead to more considerable losses if the market moves against you.
Save Up Cash: Another way to build up your day trade buying power is to simply save up cash. This takes time, but it’s a great way to ensure you have the money you need when an opportunity comes.
Use a Margin Account: Margin accounts allow you to borrow money from your broker to purchase stocks. This can be a great way to increase your buying power, but it’s important to understand the risks involved before using this strategy.
Buying Power for Options Traders
Options traders also need to be aware of buying power. Buying power is the amount of money you have to buy options contracts. Unlike stock trading, where you can buy a single share at a time, options trading requires you to buy multiple contracts simultaneously. This means you need to have enough money in your account to cover the cost of the contracts.
You can do a few things to increase your buying power for options trading. First, you can open a margin account with your broker. This will allow you to borrow money from the broker to buy options contracts. Just be aware that you will have to pay interest on the loan if you keep the position open for more than 30 days.
Second, you can use a “penny stock” broker. These brokers allow you to trade options for very low fees. However, they only offer a limited selection of stocks and options. This can be a good option if you’re just starting in the market and don’t have much money to invest.
Finally, one of the best ways to increase your buying power is to save more money. If you can put away even a tiny amount of money each month, it will add up over time and give you more money to invest in the stock market.
Buying Power for Futures Trading
Futures traders need to have a different level of buying power than stock or options traders. This is because futures contracts are much more expensive than stocks or options. For example, a single E-Mini S&P 500 contract costs about $85 daily. You need at least $85 in your account just to trade one contract.
You must have even more money in your account if you want to trade multiple contracts. For example, if you want to trade five E-Mini S&P 500 contracts, you need at least $425 in your account.
Fortunately, you can do a few things to increase your buying power for futures trading. One option is to use a margin account. You can borrow money from your broker to purchase futures contracts with a margin account. Just be aware that you will have to pay interest on the loan if you keep the position open for more than 30 days.
Mini Contracts
Another option is to trade mini contracts. These are smaller versions of the standard contracts, and they cost less money. For example, a mini E-Mini S&P 500 contract costs about $17 daily. You only need $85 in your account to trade five mini contracts.
You can also use these strategies to increase your buying power. For example, you could use a margin account to trade mini contracts. This would allow you to control the same number of contracts as if you were trading standard contracts for less money.
Regardless of your strategy, it’s important to remember that increasing your buying power can also increase your risk. Be sure only to use as much leverage as you’re comfortable with, and always be aware of the risks involved.
Bottom Line
Buying power is an essential concept for all traders to understand. It’s especially important for day traders, who need to have enough money in their accounts to cover the cost of their trades. You can increase your buying power in a few ways, but using only as much leverage as you’re comfortable with is essential. Increasing your buying power can help you succeed as a day trader, but it’s crucial always to be aware of the risks involved.
Summary: Buying Power for Day Traders
The three main ways to increase your buying power for options trading are through a margin account, a “penny stock” broker, and saving more money. Each of these methods has its benefits and drawbacks, so it’s essential to choose the one that’s best suited to your trading style.
Regardless of your method, remember that increasing your buying power also increases your risk. Be sure only to use as much leverage as you’re comfortable with, and always be aware of the risks involved in trading.
Learn More
If you want to learn more about how to get the buying power you need to succeed as a day trader, Maurice Kenny has helped over 600 people become financially free through one-on-one coaching, mentorship, and options trading strategy. Many of these new traders are now full-time traders, and they all started by watching his 1-hr webinar.
Feel free to check out other FREE educational resources to help guide you as you begin your new journey to financial freedom.
Also, download a (FREE E-BOOK) by Maurice Kenny, “DAY TRADE LIKE A MILLIONAIRE.”
