Borrow money to trade

[yhiaali3]

I never borrow to trade and I only trade with a portion of the capital that I can afford to lose. Borrowing to trade is indeed very risky, especially if the person does not have much experience in trading.

Trading, if it is not based on sound knowledge, a clear strategy, and the use of necessary tools such as stop-loss orders, is more like gambling, and even if it wins some trades, it will most likely end up being a loser.

[Mr Reporter]

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.

When you borrow money to trade/invest, you will not have rest of mind, the risk is higher than what you can imagine seriously because you will be very cautions of losing the money while the market is not controlled by you, it’s hard to get out with profit in these kinds of investments because you will hardly have peace of mind to allow any coin you traded perform as it should be since you can’t afford to lose the money you borrowed.

The first advice always given in this forum is to invest what you can afford to lose, if we can use this always, we can’t borrow money to trade since it’s a money we cannot afford to lose.

It's always a bad idea to grow such a mindset toward trading, because in no time it kills what we call the peace of mind in just a sec, and the market likely does not even care about the deadline of the loan, in fact when it's your own personal money you can even wait for a coin to pump for 4 months but once it loan every red candle of a chart make you gain heart attack..

Lending makes you take wrong decisions because you're hardly got time to think and now it makes you to even panic-sell the coins at an unfair rate and later like a week later, the coin pumps back and it makes you feel so sad…and the truth most times is that it cause pressure and also most people who borrow to trade end up worse off, even if the trade was technically a good one….

[Tonimez]

I never borrow to trade and I only trade with a portion of the capital that I can afford to lose. Borrowing to trade is indeed very risky, especially if the person does not have much experience in trading.

Borrowing money to trade is definitely a very bad approach that should be discouraged no matter the level of experience a person has in trading because there's no level of experience that completely keeps anyone safe from trading losses. If a person borrows money to trade, there's usually a higher emotional attachment to the trade money which also exposes the person into making unfound and baseless decisions.

Trading, if it is not based on sound knowledge, a clear strategy, and the use of necessary tools such as stop-loss orders, is more like gambling, and even if it wins some trades, it will most likely end up being a loser.

You're right about this but then I will say that knowledge is not enough for better trading decisions. So many people that get involved in borrowing to trade do that because they believe they have enough knowledge to utilise the borrowed money properly without losses in trading. This does not discredit the importance of knowledge in trading but it tends to emphasis more on the importance of other aspects that could save such guy from making financial mistakes. Self discipline is one of the crucial loss-preventive/minimising skills a trader should have. This skill will teach you that you should only trade with your money and not just your money, you should only trade with the amount you can afford to loose at every time. This does not undermine your knowledge but it saves you from possible unplanned financial mistakes that you can make when you completely trust in your knowledge without applying discipline (self/financial).

[Tamaperdana]

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.

Honestly, I'm quite puzzled as to why people are willing to borrow money just to start trading. It's clear that it's incredibly risky, and there's no guarantee of anything in trading. So,, after what happened to your friend, I think to make him realize it, you need to have a more in-depth, one-on-one conversation with him.

But that certainly won't guarantee he'll stop doing it. Basically,, if it's like that, you, as his friend, can't do anything. The only one who can stop him from borrowing money for trading is himself, not anyone else. So, this should be a lesson for us, because in the realm of trading, everything must be carefully calculated, especially capital.

Basically, if we use hot capital or borrowed money, psychologically, it will make us unable to control our emotions when trading. Therefore, the potential for loss is clearly very large in such a situation. Therefore, we shouldn't rely on trading as a source of income. Rather, we should only use trading as a pastime, when we have spare cash. Even then, I think it's better not to do it at all.

[lovesmayfamilis]

Having made a profit from trading, many people begin to be deceived in their abilities, thinking that they have found a secret or strategy that will allow them to earn regularly. The greed factor also plays a role here, along with excitement, which prevents such a trader from calmly analyzing his mistakes, but, on the contrary, fuels his desire to trade more often and for large amounts.

Along with their erroneous beliefs, such people begin to look for those who can lend them money, instead of calming down and taking a break.

This behavior is often compared to that of gambling addicts, and it is obvious that people with similar personality traits become addicted to gambling very quickly.

How do relatives react to excitement and haste (so to speak) and a request for a loan? I think it's clear to everyone that the formula works here: let's borrow what you're willing to lose or forget. Very often, such loans are not repaid on time or even returned at all.

[SamReomo]

The number of people who took out loans to engage in day trading is probably a very high and alarming number if you do any research in each country. People nowadays aren't hesitating to take out loans to gamble or day trade. Unfortunately, this is a big mistake. For two reasons:

1 - Few people make money trading;

Less than 10% manage to do well in trading. So asking for a loan is a bad idea

2 - All loans have interest and therefore are never good.

That number is true: some people sell their homes for trading, they think that they will make 2x to 4x of the amount from trading and then buy another home or repay the loans that they took. Such people never get any success, instead they lose their own capital by trading wrong coins or by using high leverage of 3x or more. It’s not easy to trade well with high leverage in the crypto market because the market is very volatile, those who use high leverage often lose money or their whole capital gets liquidated.

Anyone who takes out a loan has to pay interest for that loan and repaying 20% more for what you borrowed is very hard especially if the amount of loan is higher. That’s why one should never take any kind of loan for trading, gambling or for anything else. One should avoid taking loans for gambling because it’s not possible to beat the house edge.

[DanWalker]

Trading on credit is not a bad thing if those traders are experienced enough and have enough experience to make profits in the market. In their case, if they trade on credit, they will be able to repay the borrowed money. But for those who do not have the ability to control emotions and cannot exercise self-control and do not have the ability to analyze the market sufficiently, borrowing is more risky. However, if you consider yourself perfect and have a lot of experience in trading and you can control yourself at any time in the market, then if you have all these qualities, you can trade on credit.

You have to understand that trading comes down to playing the odds, and there are no guarantees. That is why even expert and professional traders cannot guarantee that they will always make money.

Not to mention, when you trade with borrowed money, you are not only dealing with market pressure but also the pressure of having to repay the loan.

In other words, trading with borrowed money means you're only adding more risk and pressure on yourself. So no matter how confident or skilled you are, borrowing money to trade is always bad idea.

[Oshosondy]

I like that everyone that have posted already on this thread do not support borrowing money to trade, it is highly bad and anyone that go for it have very bad financial management. Also the risk management that he will be using will be very bad in a way he may not have good risk management.

But the most important thing is that traders should be very patient. It is very bad to be trading with high amount of money. I prefer not to go more than 10% of my weekly income on trading so that if I lost the money, it will not have effect on my financial life.

[nelson4lov]

The reason why I think borrowing money to trade is bad is because trading itself already has its own bag of emotional requirements and weight such that the burden of debt from borrowed funds compounds exponentially and fast. 9 out of 10 times I have seen someone borrowing money to trade, it ends badly. This is not to say its net bad. It can work sometimes but more often than not, it wouldn't.

When drawdowns comes (and they usually do), people that borrowed money that are essentially trading their PnL due to the need to meet interest requirements on borrowed funds tend to tilt the hardest and it is a known fact that not managing tilt in trading leads to bigger losses and drawdowns that are harder to recover from.

This is why in my short trading career, even at huge drawdowns, I resist the urge to take loans or borrow money to trade. If I have money I can afford to lose, I trade. If not, I sit on my hands and look for earning opportunities that would give me capital.

[Cossyblack]

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.

Of course he won't tell you because he knows you will kick against the idea that's why he did it secretly but after he sank the whole money into trade that was when he realise was the right time to tell you.
Your friend was ignorant of the fact that he knew of the impeding danger of borrowing money to trade yet he still went ahead to borrow. because he has been learning and the same time trading so he can't tell me that he doesn't knows the prons and cons about trading. There's nothing he can do to retrieve those his money back,so he should learn something from this and he should stop borrowing money to trade because it will put him in a tight corner if his trade didn't work as plan.

[Supreme Donvic]

Anyone that is addicted to trading can do anything just to trade which involves borrowing money. I know someone that is addicted to trading, he always borrow money when his broke just to trade. People who are addicted to trading are in a very big problem because it can destroy them.
The stage your friend is right now can destroy him, I am sure that he's going to borrow another money for trading while still owing the other person he borrowed the first money from.
I will advise you to talk to him and if you know he cannot listen to you, find someone that he listens to so the person can talk to him, because if he continues this way his going to be in a very big debt.

[Zigabel]

People possibly still see trading as a get rich quick scheme and this is just too clear in their approach,  because if that is not the line of taught and you think in probabilities like a trader should,  you will not make such moves.  Borrowing to trade is never a good idea because trading has never come with any form of assurance and certainty for profit or money back for funds that were borrowed.  The idealogy behind trading was never to get traders to be desperate to the point of sourcing for capital by any means which could mean desperation.

Desperation is the major reason I believe will make anyone borrow to trade,  even as an experienced trader, it is never a better option to raise capital for trading.  It is not good for your psychology as a trader as it will exert some forms of pressure on you, thereby affecting how well you trade, and even if you get profitable,  your margin will be just too low. Never Borrow to Trade, rather don't trade at all.

[Karl_3000]

People possibly still see trading as a get rich quick scheme and this is just too clear in their approach,

This is the truth that all traders do not want to accept. Some people get it right but only just small number of people that are getting it right. Almost all traders are thinking they can be making money from trading daily or often but they will later know that they are only deceiving themselves. The best is to hold but they will think 3 or more years before making profit is too long but which is better than trading and losses.

[Findingnemo]

So he got a loan with an interest rate of 18% per month, which implies that he sees trading as a quick money-making scheme which itself a red flag and the friend need to change his perspective about trading or he will end up with more debt that can't be paid throughout his entire life.

If someone has monthly income of $1000 then I recommend to start trading with $50, for that no need a loan and this small start will be the road to learn more about trading without getting into debt trap.

[Texac]

Anyone that is addicted to trading can do anything just to trade which involves borrowing money. I know someone that is addicted to trading, he always borrow money when his broke just to trade. People who are addicted to trading are in a very big problem because it can destroy them.
The stage your friend is right now can destroy him, I am sure that he's going to borrow another money for trading while still owing the other person he borrowed the first money from.
I will advise you to talk to him and if you know he cannot listen to you, find someone that he listens to so the person can talk to him, because if he continues this way his going to be in a very big debt.

Apart from people who are addicted to trading, those who have the wrong idea that they can make money quickly or get rich from trading can make the same decision. They think a few winning trades will be enough to repay the loan and still make some profit, but it's not that simple.

And when someone has this kind of mindset, it's very hard to give them advice or make them understand. They will only stop after paying a heavy price.

I also think OP should try talking to his friend and give him some advice, but I don't think his friend will come to his senses that easily.

[Tamaperdana]

I like that everyone that have posted already on this thread do not support borrowing money to trade, it is highly bad and anyone that go for it have very bad financial management. Also the risk management that he will be using will be very bad in a way he may not have good risk management.

But the most important thing is that traders should be very patient. It is very bad to be trading with high amount of money. I prefer not to go more than 10% of my weekly income on trading so that if I lost the money, it will not have effect on my financial life.

Yes, it's better, because trading with significant amounts of money carries significant risks. We never know which direction the market will move, especially if trading in less reputable altcoins, which is even more dangerous. Furthermore, patience is the key to a trader's success. As far as I know, truly experienced traders never rush into a trade. Even if there's no suitable market for entry within a week, they definitely don't enter at all.

Trading is certainly not easy, and if we misunderstand it, we're in a very dangerous situation. Using borrowed money, especially, is tantamount to suicide. So, my advice: if you don't have sufficient capital for trading, don't trade. This means your financial situation isn't good enough and you can't afford to play the market. Therefore, if you're at that point, it's better to first improve your financial system, including income and other factors. This is better than borrowing money for uncertain purposes.

[Barikui1]

As a trader that wants to succeed in the market, we should never try such, by borrowing money just to trade the market, because it's destined to fail from the very beginning. We all know that trading should be done by a fund we can afford to lose, or can we afford losing the borrowed money? No.
 So when you start trading with a borrowed money, their is an additional pressure attached to your trading activity because you can not afford to lose your margin, which will easily result into an emotional trading.

And another bad thing about it is that the interest of the loan and the timeframe of repaying it back will make you want to trade anything you see in the market, just because you want to meet up to repay the debt and also make some profit from it, which might be very costly because patience and taking the best available trading set up are very important, not by being impatient just because of the debt you want to repay.