Why is my cash buying power different than settled funds?
In a cash account, your buying power is the maximum dollar amount that is available for trading. Since sale of securities requires a two-business day settlement period (T+2), proceeds generated by selling stock in a cash account are considered unsettled for the two-day period following the trade date.
For example, you bought 100 shares of ABC stock on Monday and sold them for $2,000 on Tuesday. The proceeds from the sale will settle on Thursday (T+2). The $2,000 sale proceeds will be added to the cash buying power and will be shown as settled funds on the Thursday settlement date.
It is important to know that every purchase of the stock in cash account was fully paid for. The account may commit a freeriding violation from buying and selling shares without having the capital to cover the trade. To avoid the freeriding violation, Firstrade will only add the sale proceeds from a day trade to the cash buying power on the next business day.
For example, you bought and sold (day trade) 100 shares of ABC stock on Monday. The $2,000 sale proceed will only be added to the cash buying power on the following business day on Tuesday. The settlement day of the sale will still be on Wednesday (T+2).