Webull is a popular stock trading app that allows everyday people to invest their personal money to purchase stocks and ETFs (commodities). However, since Webull isn’t as heavily regulated as corporate structured hedge funds, they have certain regulations in place to protect the safety and security of both their users and the stock market.
One of the most common questions that new users have is about their “Buying Power” on Webull. So, what does it mean when you get the notice: Buying power is insufficient for this order on Webull?
Buying power is insufficient for this order on Webull means that the total cash held in the brokerage account plus all available margin is not enough to buy a certain stock or ETF. To increase your buying power, you will need to add money to your Webull account.
In today’s article, I’m going to explain how buying power works, what the point of it is, and also how to increase your buying power so that you can buy all of the stocks you want.
If you want to be a successful stock trader (even if it’s just part-time), then it’s important to understand buying power and how to manipulate it to your advantage.
Get your notebook out, and let’s dive in!
What To Do When Your Buying Power Is Insufficient on Webull
We’ve all been there before (even myself)…
Webull has a quick and easy process for opening new brokerage accounts. It usually takes just 24 hours to get your Webull account approved.
You decide that you want to start investing in stocks a bit, open up your Webull app, and start searching around for some good investment options.
You purchase a few small stocks here and there, which all go through smoothly.
Then, you decide that you want to purchase a partial stock from a large “Blue Chip” company like Facebook or Amazon.
Your excitement builds, you click ‘Place Order,’ and then-
Sorry, but your buying power is insufficient for this order!
The order doesn’t go through, and you’re left wondering what the heck buying power is, how you’re supposed to change your situation, and more importantly- how to buy that stock that you want so badly.
After all, if your next-door neighbor Jim was able to buy Amazon last week, why can’t you?
Admittedly, Webull (and even Robinhood and Stash for that matter) aren’t always the best at explaining things. They kind of expect you to understand terms like “buying power” before you start investing.
For those of you like me who like to skip the long, boring, educational bits, these random messages and pop-ups can be quite disappointing.
Take it from me because I had to learn the hard way– educating yourself on the market and common market terminology is essential if you want to be a successful investor. I also recommend that you paper trade for a few months before you start investing with real money.
So, that being said, let’s discuss what buying power is and what you need to do to increase your buying power on Webull.
What Is Buying Power?
In Webull, your Buying Power is basically a calculation that is used to determine whether or not you’re capable of purchasing and managing a certain stock. The Webull user guide states:
“Buying power is the money an investor has available to buy securities and equals the total cash held in the brokerage account plus all available margin.”
In layman’s terms, this means that your buying power is based on two things:
- How much money is in your Webull account.
- How much margin you have available (if you’re using Webull’s margin account service).
If you just have a standard account (not a leveraged margin account), then the money in your account is all that matters. For example, if you have $500 in your account, then your buying power is $500.
Webull Margin Accounts
If you have at least $2,000 to invest, you can sign-up for Webull’s margin services.
Essentially, this allows you to invest $2,000 of your own money, and then Webull will “front” you up to 3x the amount you invest. It’s kind of like a short-term loan that you’re expected to pay back with your profits.
So, if you have a margin account with $2,000 of your personal money invested, then your standard day trading buying power would be $8,000. This means that you could purchase up to $8,000 worth of stocks, securities, and ETFs at a time.
What Is The Point Of Buying Power?
Although it may be a bit of a hassle to deal with, buying power is actually very important to keep traders and banks safe.
Buying power is actually regulated and mandated by the Federal Reserve Board, and differs whether you have a personal account or a margin account.
It’s their way of preventing new investors from over-buying and taking uncalculated risks (like shorting stocks) that could result in huge losses to them.
Without this rule, then Webull could “lend” an investor $20,000 on their $2,000 investment. Then, let’s say that this investor loses all of their money with a couple of bad trades.
Now, they owe Webull (or whatever bank/fund they invested through) a huge sum of money that they can’t ever hope to repay.
The rule ensures that investors are only loaned what they can reasonably repay should things go wrong.
How To Increase Your Buying Power
Want to increase your buying power? The answer is simple– just add more money to your Webull account.
First, you’ll need to link your personal bank account (routing and account number) or debit card to your Webull account. Then, transfer the amount that you need to buy the stock that you want.
Also, keep in mind that some securities have minimum purchase requirements. Even though Webull allows you to buy partial stocks (for instance, buying $500 worth of a stock valued at $800/share) the securities themselves might have a minimal investment limit.
That $800/share stock may require that you invest at least $100 to purchase partial shares.
Always Invest Wisely
A lot of first-time investors are hopping onto Webull and other trading applications due to the recent Gamestop/AMC news footage, hoping to strike it rich.
While there is certainly a lot of money to be made in these “short-stop” investments, there’s also a lot of money to be lost if you’re not careful with your investments!
Always do your research, start small, and don’t invest more than you can afford to lose.
Until next time, happy investing and good luck!
Want to trade after hours on Webull? Check out this blog post.
