Borrow money to trade

[Z_MBFM]

I have a friend that is a trader like me, we talk about trading very well, but he told me something shocking today which let me think that trading is gambling for some people.

He is having business and earning almost $1000 monthly, he borrowed $1500 and he will pay $1800. He borrowed it to trade and lost everything within 3 days.

Also I noticed that he is addicted to trading but he said he is not. He told me that he will not make such a mistake again, but he wants to further learning more about trading.

I have advised him. He likes using stop loss and other things that he can use not to lose, but he still lost money anyway until he lost all the money.

When he wanted to borrow, the did not tell me, I would have advised him not to borrow the money.

Just like if a person is addicted to gambling, it will be as harmful for him as it is for him, even if he is addicted to trading, a person will be financially affected. In fact, at one time, traders were serious about spot trading, but now traders are more likely to do futures trading in the hope of quick profits. Your friend is trading with a fairly large amount. Now the question is, is your friend trading futures or spot trading? If he is doing spot trading, then he may lose, but he will learn a lot from that loss and he will not lose his money completely or he may lose some part of his budget. And if he is addicted to futures trading, then it will gradually become very dangerous for him. He will continue to increase his capital by becoming emotional after losing and if he is in the habit of borrowing, he will not only lose his money but also get into a lot of debt, which will become a big financial threat for him in the future. So try to convince your friend as much as possible.

[Junii]

When he wanted to borrow, the did not tell me, I would have advised him not to borrow the money.

As a friend u gave him a better advice if he never obey it is his fault not yours. Also i noticed as well that for some people especially for beginners for them trading is same like gambling but in a suit because they treat a trading like they will invest a 100$ or more and overnight or with high leverage they will double it quickly when a person thinks like that or came in market with type of mindset the market humbles them very quickly. Also on social media fake influencers or course sellers and also binary traders they represent trading like it is a cup of tea but the reality is it is not that easy and simple that is why many people borrow money and think like when they earn profit from it they will return it back but they didn't know that they are the fresh liquidity.

[Odusko]

This story reminds me of some guys who was close to me way back like three years ago, this guy went about collecting money from other's with the aim to trade in and then they get a share of the profits, the even have the percentage sharing agreement and arrangement.
But with time he run into a very huge debt that he has not paid back until now, the problem was that when the trade was not yielding the desire profits and accumulating losing, his client where busy calculating their potential earn profit and capital, unkownely to them, the guy just sold to them hope and not real income, so this is same like someone taking a loan to gamble with or trade with you will always end in a bad situation.

[Questat]

He borrowed money not because he is confident to trade, but because he believe that even if it will end up a loss, he is still capable to pay. That's the difference for those who borrow money and only rely on their future profits than those who borrow who have secured and sustainable income to pay.

You know, I'm not against with those who borrow funds if they want to start trading as long as they are able and capable to pay. The only mistake here is that he started trading with a huge amount of capital, that only increases the risk to lose, because any time he will end up losing everything he has and that really happened.

If he was advised in the first place to trade with something he can afford to lose, maybe he won't lose such a huge amount. But anyway, that was not totally a mistake, but doing it the second time around, this time it will be his choice, if he'll lose everything surely he will regret after.

[jossiel]

Also I noticed that he is addicted to trading but he said he is not.

No one's ever going to admit that they are, remember that.  

But you have the idea already and you told him that he should stop borrowing money once and for all. You did the right thing there.

Now, the burden is on him whether he'd follow you or remember what you have told him. Because if not and things go worse for him, that's on him and not on you.

[salad daging]

Is your business still going strong and not bankrupt? If it goes bankrupt then he will not be able to recover losses in trading even borrowed money will be difficult to pay off.
If the man still has a business with an income of $1000 a month, chances are he can get up as long as he does not buy large amounts of trading, what is high-risk Futures Trading.
He is too trusting with the skills he has until he borrows the money as if his trading is already proficient and can make big profits, this is a bad idea to borrow money to trade.

[Odogwu-Blockchain]

Maybe he might have seen many fake traders on social media flunting their fake winnings , thinking that's real. Maybe he might have seen how these guys leaves their lifestyle and think he wants to meet up.

Don't blame him most times, he is intrigued my all these and thinks the that's why for him.

The solution to his problem is not learning to trade, but temporary quiting for 4+ months, to enable him reset his brain and then try again through different source.

[stadus]

Other people may notice that addiction is there, but the person involved will always be in denial. For them, they are just trading just like other traders, and they are losing because trading is really difficult to make a positive trade, not because they are addicted to trading that made them resort into wrong decision-making. That will always be their reason, they will never accept the fact that trading addiction is one big reason why they are losing a lot.

However, he's really confident to borrow money because he knows he has a continuous flow of income, but if he keeps on trading blindly just to sustain his trading addiction, he might end up in business bankruptcy later on because all his profits from his business will only be used in trading.

[letteredhub]

When he wanted to borrow, the did not tell me, I would have advised him not to borrow the money.

Regardless of ones expertise I would never agree to encourage anybody to borrow to trade, and if there's anyone here who talked to someone about his consideration to get a loan to use for trading and that individual/friend encourages it, then just be on the know that he/she isn't a true friend.

It's inevitable that you won't be trading under emotional pressure on trying to make effort to be able to refund the borrowed money in time. Under such pressure, a trader lacks a mind if his own as he loses control of making logical entries and exits.

[Maslate]

This isn't the first time that I have heard of people borrowing money to trade or tell people to give them money to help them trade. After losing it all, it becomes a problem to pay back the debt. Some people think that trading is easy especially, when you have the mindset of getting rich through trading, you will deviate from trading to gambling.

Your friend need to stop trading if he's already addicted to prevent further losses and if he's not yet an addict, he shouldn't trade till he pays back his debt. Traders run at loss in the long run.

People get more motivated to start trading when they hear successful trading stories that end up in fortune. But they don't consider the high risk to lose from trading that made those trading addicts turn broke and homeless in the end.

Borrowing money in order to finance his trade is one obvious reason that he is really an addict, otherwise, he could have saved up little by little from his business, and just trade when he has a earned even a small amount. And certainly, no addiction that will lead you to profits, it will always go the negative way and lose all your money, that's why when you have sense your habit is now heading to addiction, you should be responsible enough to stop or minimize trading in the market.

[Alphakilo]

When he wanted to borrow, the did not tell me, I would have advised him not to borrow the money.

Regardless of ones expertise I would never agree to encourage anybody to borrow to trade, and if there's anyone here who talked to someone about his consideration to get a loan to use for trading and that individual/friend encourages it, then just be on the know that he/she isn't a true friend.

It's inevitable that you won't be trading under emotional pressure on trying to make effort to be able to refund the borrowed money in time. Under such pressure, a trader lacks a mind if his own as he loses control of making logical entries and exits.

Yea, proper reasoning is thrown out the window when trading with borrowed money, mostly when it involves interest rates on repayment.
Some of the times, I think it is more profitable to even trade with little knowledge and with personal funds, than to wait to trade with all the knowledge of trading but with borrowed funds.
Even if strategy in trading is what differentiates it from ordinary gambling, as long as borrowed funds is involved, it becomes automatically gambling to me. Almost like trying to rob Peter to pay Paul?

[laspol65]

At the beginning, I blame you, you shouldn't have lent $1500 at once. He is addicted to trading, because his behavior definitely shows signs of addiction. Maybe he took up trading after trading, he didn't feel the need for research, but in any case, it is better to know about your friend before lending money.

Because your friend lost money, he could not overcome the pain of losing money. However, your friend should definitely be advised to do a good market research before entering trading, if there is a lack of research and experience, there is a possibility of losing. And after losing and winning, he must take a rest, otherwise he may fall into the greed of money and reach the goal of addiction again.

[logfiles]

Worst mistake he ever made.

He should have just used part of the money he generated from business to trade. An amount that won't affect him if he loses it. Like $100 per month. Borrowing money to trade means that you add pressure to yourself because it's the money you can not afford to lose. Psychologically, you are already affected even before you make the first trade. I hope he learns a valuable lesson from that experience and never repeats that mistake.

[Botnake]

Traders can always gamble in trading if they are too much focused on the potential profits they can gain after having a positive and successful trade, but they fail to realize that trading creates higher risk for traders to lose a huge amount more than what they can experience when they are in profits.

If these traders are hungry for profits, they can really turn as trading addicts, but if they are cautious on the outcome of every trade, and are highly aware of the risks associated in trading, they can be responsible traders and can easily prevent the addiction that lies along in trading once they become more greedy and emotional traders.

[BitMaxz]

That amount of $1500 is large; how does he trade it in three days? Pretty bad; it's a borrowed amount too risky to use them in trading without knowledge of how risky the trading is.

Even if you use stop-loss, if you don't have proper risk management, it won't work to make a profit for me; I am going to split the risk into tiny. I only risk 2% to maximum 5% of that total capital. Even 1% is a good start if you still don't much knowledge about trading.

I believe that guy is against the trend because he thinks that buy low sell high works when the price is in the bearish trend, and he took in to go long the thing that he didn't check is the momentum might still be strong that could lead to your stop loss being hit.

Remember if you have a trading system, like rules, entry conditions, and proper risk management, including position sizing. You must strictly follow them because if you are just trading because you see on YouTube that strategy will make you profit without thinking about the psychology of that strategy, rules, and conditions, you might be doing it wrong, which could lead to losing even if you strictly have a stop-loss.

[2stout]

Playing with house money, i.e. money that is not your own, is typically a bad move.  Repayment will cost more than the original amount and coming out ahead is really a gamble.  Even more confounding is that the OP's friend admits that he needs to learn more about trading, seems like he wasn't even on a solid knowledge foundation.   

[laijsica]

Stop loss is a trading strategy that, if followed properly, can significantly reduce the amount of losses a trader can incur. I know of some folk who are addicted to trading who bought for short term purposes and lost most of their funds within a few days due to lack of patience.

I believe that trading can be as addictive as gambling, especially for those traders who want to make a quick profit. They end up going bankrupt by using large amounts of funds without considering their financial capabilities.

[maydna]

Borrowing money for trading is not a solution, you never know what risk you will face and how solving that. Let say you can profit, that will not make you difficult to pay the borrow money but if you lose, how you will pay the money? People don't have to borrow money for trading but they can use own money to trading. They will not meet a big trouble if they lose because that is their own money. They only need to focus with the trade and if they lose, that will not be a big deal as they know the risk.

[DanWalker]

At the beginning, I blame you, you shouldn't have lent $1500 at once. He is addicted to trading, because his behavior definitely shows signs of addiction. Maybe he took up trading after trading, he didn't feel the need for research, but in any case, it is better to know about your friend before lending money.

In my understanding, OP didnt lend his friend the money. His friend borrowed the money from someone else and only told OP about it after losing everything.

Because your friend lost money, he could not overcome the pain of losing money. However, your friend should definitely be advised to do a good market research before entering trading, if there is a lack of research and experience, there is a possibility of losing. And after losing and winning, he must take a rest, otherwise he may fall into the greed of money and reach the goal of addiction again.

From what OP shared, his friend seems to have developed a trading addiction. For people who are already addicted to trading, stopping is the right thing to do, not spending more time studying the market and continuing to trade.

Another problem is that I don't think giving advice to people who are addicted will help much, because they will never admit that they are addicted or want to stop.

[Woodie]

There is just something about doing things with money that you know isn't yours... Trading, gambling or whatever it is just change's your mentality when you handling this kind of money & you play with fear, and unfortunately to win in this game needs you to have a free mind, already like we can see in the OP, this person was thinking of doubling the amount of paying back plus making his own money which just puts you in a tight spot and usually ends in losses.