Borrow money to trade

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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.

I think it is time for you to tell your friend that maybe he is not using the correct method to trade if he is mostly losing money instead of profiting from his trades. You should also advise him that it is better not to borrow any money to fund his trades as trading are very risky and once the losses starts, it will usually snowballs so fast before any traders would actually realize that their account are being totally liquidated as the maximum stop loss in their trading account got triggered automatically by the system.

[Big Dirams]

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.

No matter what the get rich quick mindset will always be there even if not full percentage but the trader will want make money as soon as they can because they have things to get settled. This kind of situations would always lead the trader into making inappropriate decisions and apparently this decision will result into them losing money or regretting their decisions.
Trading shouldn’t be done with frustration and hesitation, a traders mindset should be in calm mode before we should consider placing an entry but in this scenario the traders mindset would always be frustrated so let not borrow money and trade.

[Gozie51]

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

The thing is that people know it is not the right thing to do and they won't want another ear to hear such plan. And most times you will think to start trading means you will start making profit instantly and so paying back won't be a problem. But the reality is that it doesn't work that way with trading. It is dangerous to borrow money to trade because you will be under pressure not to lose the money and you take wrong decision. People borrow to invest though but not in start up and trading does not have a guarantee for profit that is why some people see it as gambling too.

[pusaka]

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

The thing is that people know it is not the right thing to do and they won't want another ear to hear such plan. And most times you will think to start trading means you will start making profit instantly and so paying back won't be a problem. But the reality is that it doesn't work that way with trading. It is dangerous to borrow money to trade because you will be under pressure not to lose the money and you take wrong decision. People borrow to invest though but not in start up and trading does not have a guarantee for profit that is why some people see it as gambling too.

A major mistake is borrowing money to trade, as the risks involved in trading are enormous. Even if you're using personal funds, make sure it's money you won't use for anything else. Using it for daily needs can lead to problems.

Sometimes, it's true that someone knows what they're doing is wrong, but they force themselves to do it because they hope to profit, so they can repay the loan and still make a profit. And usually, such people will tell you after the fact, because if they tell you upfront, they know they'll receive advice rather than support.

[WatChe]

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.

Trading itself is not a risky thing but such mindset make it highly risky. There are many such stories where people invest huge money in trading and they end up losing everything. People who think that trading is just about putting money and they will get instant profit are the one who usually bear heavy loses. Those who understand how to handle trading and have self control are the one who get most out of the trading. If you are new to trading then its not a good move to take loan for trading.    

[PostQuantumBTC]

[If you are new to trading then its not a good move to take loan for trading.

All what you said already are very good, it is true that trading should not be what people should be expect instant profit, but this part that I quote is not quit accurate because it is not everyone that are new that should not take a loan because of trading, even old traders should avoid all possible reasons and avoid taking loan because of trading. Taking loan will make trading decision making to be poor for the person which will result in loss of the money.

[bangjoe]

People like this have always existed, problems like your friend I have encountered several times and yes from the form of the reasons made and the trading mechanism that is done he treats trading like gambling.

And even every time there will be an FOMC release or CPI report, he always takes a position, he admits that he is trading on the same thing as gambling on news, and what surprises me most is that he cannot take leverage with margins that are not accompanied by risk management.

He borrowed money from me, and he was just a freelancer, and I certainly didn't lend it because it would create a long drama when I charged my own money in the future.

[citywise2]

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.

I think something is not told about your friend! How come he is a businessman, who earns $1000 per month and yet goes to borrow $1500 to pay $1800. That tells he is a great gambler forget he claims to be a trader. If he indeed has been trading with stop loss, then you can't loss it all even if you were wrong with your trading decision. He needs to tell himself the truth and either settle down to learn how trading is done or continue fooling himself until be becomes far behind in money and life.

Borrowing to do business is not back, but you should already have a business and borrow only to expand it and not to start it because paying back can becomes a big  burden  and it is worst when you intend to trade with it, because it would blur your mind and almost impossible to make profit and that is even if you are good in trading.

[Smack That Ace]

Trading itself is not a risky thing but such mindset make it highly risky. There are many such stories where people invest huge money in trading and they end up losing everything. People who think that trading is just about putting money and they will get instant profit are the one who usually bear heavy loses. Those who understand how to handle trading and have self control are the one who get most out of the trading. If you are new to trading then its not a good move to take loan for trading.    

I disagree. Trading is already risky activity by itself, and instead of trying to manage and reduce that risk, some traders with the wrong mindset only make it much worse.

Trading is risky because it is based on probabilities. That's also why even if you take it seriously and follow strict discipline, there is still no guarantee that you will win consistently.

So borrowing money to trade is a very bad idea, especially for beginner. That's more like gambling than trading.

[LogitechMouse]

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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.

You gave the advice a bit late, but not giving any advice for your friend would be way worse after he lost the money that he took out and borrowed.

I will not have anything to say anymore about not using stop-loss because I have this thinking where that might be your strategy, and if that works for you then there's nothing bad about it. As for the trader getting addicted but still denying it, there are some traders and even gamblers who are into this kind of phase where they deny about the fact that they're addicted into it even though it's pretty obvious to other people that they are. I wonder though how your friend lost $1800 in just 3 days? Overtrading? Overleveraging? Revenge trades? No Risk Management?

On the good side though, you also said that he's earning $1000 monthly, so he can just repay that loan in 2 months or even longer, so at least he's not like other people out there that they're taking out a loan even though they don't know how they can pay it. Well, I guess that it's good that he have you as your friend because you can give some advices to him in order to not lost that kind of money anymore.

Losing $1800 is a very expensive lesson, but as long as he learned from that one then that's fine. It is what it is, and the best thing that he can do is to not let it happen again.

[HustleZ]

[…]

Money for trading should always be borrowed when a person has full trust on his strategy, you should not borrow money purely off greed so that you are able to profit more because in search of profit you will lose your whole capital,. Most traders including me have made the mistake of not having proper goals and a plan in trading. I started trading without a goal and vision which ultimately led to me washing the whole account so borrow only when you have a proper backtested strategy not when you want to win more by investing more

[danherbias07]

This is the mistake most newbies will make in trading. They think it is that easy to trade, so they use large amounts, thinking they will succeed and make profits that fast. They did not even think that they could use small amounts first and try to learn the market. That's what I did back then. Put $30 in one cryptocurrency, monitored it, and somehow made some profits. Rinse and repeat. But when I felt like it was eating a lot of my time since monitoring it is not easy, and sometimes I don't get enough sleep, I stopped it.

Trading is not something to mess with if there's no focus, enough time to check it, and the patience. If your friend is avoiding you now, it means he doesn't want any advice. Let him be. He will come back.

[Rockstarguy]

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 think the level of his understanding is what convinced him he can borrow money to trade. One of the problems with some traders is overconfidence; it is possible there might be some trades in which he made a profit, and this could be a reason to be so confident and desperate to take losses in trading.

Trading is always unpredictable, no matter the level of understanding one might have acquired, because there is no guarantee of making a profit in every trade. Understanding trading doesn't mean one has to take costly risks that can't be afforded to lose; there should always be limits, and this is one of the qualities of being a good trader.

[Jatiluhung]

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.

If someone is even willing to borrow money to trade in a market they haven’t fully mastered yet, then yes, there are indeed signs that they’ve lost some control over their own emotions which could also be described as a form of addiction. Or, what worries me is that they want to recoup previous trading losses and hope to make a profit on their next attempt, even with borrowed money, which will actually only further destabilize their emotions.

I think many of us here also have acquaintances or friends who exhibit the behavior described by the OP. I, too, have several acquaintances who’ve made the same mistakes as the OP described. And honestly, it’s hard to give them advice. 

It’s just that people like that usually come to their senses on their own after a few setbacks from which they can’t quite recover. They’ll start to regret their actions, begin to complain, and want someone to listen to their complaints. 

[Pandu Geddon]

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

He did not tell you before borrowing money because he knew you would stop him. I do not know if your friend was actually good at trading before or just an average trader who might lose more than gain. But his confidence in borrowing money for trading capital can’t be justified. Since your friend has been trading, he should know the risks of borrowing money for his trading capital. Now, how is your friend dealing with his problem?

[Ayers]

Money for trading should always be borrowed when a person has full trust on his strategy, you should not borrow money purely off greed so that you are able to profit more because in search of profit you will lose your whole capital,. Most traders including me have made the mistake of not having proper goals and a plan in trading. I started trading without a goal and vision which ultimately led to me washing the whole account so borrow only when you have a proper backtested strategy not when you want to win more by investing more

Even if you find good strategy and have backtested it, that does not mean it will keep working in your future trades. Because markets are always changing, and a strategy that worked well in the past can still fail when market condition change.

Trading is a probability game, and it doesn't come with the kind of certainty you get from regular job. so borrowing money to trade isn't a smart move, no matter how confident you are in your strategy.

the market is unpredictable, and you cannot control it. So don't turn a trading loss into a debt that you still have to pay back.

[Abdulzuruku01]

No matter what the get rich quick mindset will always be there even if not full percentage but the trader will want make money as soon as they can because they have things to get settled. This kind of situations would always lead the trader into making inappropriate decisions and apparently this decision will result into them losing money or regretting their decisions.
Trading shouldn’t be done with frustration and hesitation, a traders mindset should be in calm mode before we should consider placing an entry but in this scenario the traders mindset would always be frustrated so let not borrow money and trade.

Yeah i agreed with your points. And another thing is frustration is always bound with borrowed money, rather than when you are calm using your own money to trade. The weight of a borrowed money usually weighs on someone and translate through frustration and hesitations. Because that ultimately leading to making inappropriate decisions. And almost always, trades like that hit stop loss easily, that is if the trader remembers to keep a stop loss.

[ndutndut]

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.

It can be difficult to offer advice to people especially those who have already borrowed money to trade suffered a loss, and are now focused solely on borrowing more money to trade again in hopes of paying off their existing debts. They often get trapped in this cycle offering advice becomes futile because rather than listening they simply stop sharing details about their actions when they borrow money to trade again.

Your friend’s situation mirrors exactly what happened to a friend of mine. The root cause was the same: employing a flawed strategy borrowing money to trade with the expectation of making a profit to pay off the debt. This is precisely why beginners are constantly advised to trade only with money they can afford to lose the goal is to keep you out of debt. Regardless of the context debt is detrimental to your future financial health and this is especially true when borrowing to trade an activity that offers no guarantee of profit. Therefore having the right mindset is crucial before you start trading.

[SOKO-DEKE]

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.

Why will someone borrow money to trade when they know that they don’t have any full assurance that they’re going to make a profit, or that they might even end up losing the money? The funny thing is, when they take the loss, it always comes with interest.
Just imagine now: they borrowed $1,500, but they’re paying $300 in interest. I don’t know why some set of people are willing to go to this extra length to take this kind of risk, even though they know that trading is very hard and it’s not guaranteed that they will make a profit.in fact, no matter how much confidence I have in my analysis, I will never borrow money to trade. The only money I can use to trade is my discretionary income, and that’s it.But what pushes some people to take risks like this? I guess it’s the eagerness to make money quickly.

[GIF-JOBS]

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.

Trading itself is not a risky thing but such mindset make it highly risky. There are many such stories where people invest huge money in trading and they end up losing everything. People who think that trading is just about putting money and they will get instant profit are the one who usually bear heavy loses. Those who understand how to handle trading and have self control are the one who get most out of the trading. If you are new to trading then its not a good move to take loan for trading.    

Those who have such reckless confidence will only end up in more ruin, as happened here. They are so confident in themselves that they even want to trade with borrowed money, but what do they actually get in the end from such activities? Huge financial losses and debts.
Trading should always be done within your means, emotions and greed will only lead you to make wrong decisions. So first of all, trading should never be seen as a way to get rich quick. And at the same time, no trade is guaranteed, so you should never decide to trade with 100% certainty, especially by taking out a loan.
Learn trading slowly, trade in small increments, limit yourself to what you can afford to lose, and always decide to trade realistically, overconfidence can only lead to losses.