Borrow money to trade

[Nrcewker]

It’s better not to trade than to borrow money from someone else and trade with it. I would say there are two reasons why you should never borrow money for trading. First you have to pay interest, which is extra money you need to make and then give to the lender. Secondly you will be risking someone else’s money. If by any chance you lose the money, you will now have to do twice the work to earn it back.

Like OP’s friend who made this mistake, I don’t want anyone else to fall into the same trap and end up with debt on their head. What you can do instead is take a small portion of your monthly income and use that to trade in the market. I know the initial profits will be low but at least you will be able to trade stress free right?

[uchegod-21]

A very strange decision, considering that this person earns only $1,000 a month, he is willing to take out a loan that will take him several months to repay. And since you say that he lost everything in just three days, I can assume that he has absolutely no risk management. I also assume that he is trading with leverage, which significantly increases his risks. I think that, to begin with, he should learn the basics of trading on the spot market. Only after becoming a reasonably experienced trader should he try trading with leverage. Although, personally I consider leveraged trading to be more like gambling.

I briefly asked myself what motivates these people to take such risks with borrowed money? Then the response I gave myself was that these people are not truly traders, they are just people who believe that trading is a means to get rich quick, that there is alot of profit to earn from trading. Whoever introduced them to trading did not explain well to them what they should be expecting. They weren't told that risks management is a very important skill to traders. It is good how bad decisions and wrong mindsets teach these kinds of traders lessons; lessons they eventually learn from to become better traders. That is if they still wish to be traders.

Maybe his capital got wiped out because he was using high leverage after getting liquidated when the price dropped or vice versa, he probably thought the drop was over and relief bounce will happen, recovering his lost will be his prioritize. With that mindset, even I might look for another money to enter the trade again but that would be very greedy and impatient if I didn't have self control.

When money is involved self control is very important, we’ve already seen lots of people will do anything when greed took control their decision. That kind of mindset led him to lose more his money in just three days and his overconfidence probably made him to borrow money.

The very fact that he borrowed money to trade is the very reason he will put all his emotions on how he will trade. Whatever he does will be less  about skills, and more of emotional influence. This is why no trader should put himself in a state where he is left to choose between the plans he already has mapped out, or to bow to his emotions.

I agree with you that borrowing money to trade is a NO NO. Some people do that and lucky they survive the situation while some just end up in adding more debts to the ones they are having, which I would also say that borrowing to trade is a wrong idea.

Trading is risky and unpredictable, but with good skills, you can successfully navigate through the risks. But once everything shifts from skills to trying out luck, that is gambling. Any trader that has the mindset that he wants to try his luck is not a real trader, he is gambling in the wrong space.

[snowpega]

...
Trading is risky and unpredictable, but with good skills, you can successfully navigate through the risks. But once everything shifts from skills to trying out luck, that is gambling. Any trader that has the mindset that he wants to try his luck is not a real trader, he is gambling in the wrong space.

Yeah, this is true because if you don't have skills in the trading space, then you are obviously gambling your funds. But if you are well skilled, then I would say still the same which is risk is still there, watching you out there to hunt you. This is the crypto space, which is well known for its unpredictable behaviour. This is why I think if you are well skilled in trading, my advice is still that you should never take risks with the money you borrow from someone.

I still remember the day when one close friend of mine was offering me money and said me to return whenever I will be in a good situation. But I literally denied him that time instantly. And I did not take this risk. First of all, I try my best to stay away from the trading space and really get involved very little. Well, in your case, would you take this risk if you are a good trader and trade with the money that you borrowed from someone?

[HelliumZ]

Borrowing money and trading with it is not a bad thing in any way, but it should be done with enough opportunity to repay it later, otherwise the borrowed money will have to be paid back twice as much in interest later. However, if someone borrows money and trades carelessly with that money and loses money by trading futures, then it will definitely be a risky job for the borrower. If someone borrows money at high interest and starts trading incorrectly or loses money by trading futures due to excessive greed, then the path to bankruptcy will be cleared for him. Therefore, those who cannot repay the money should stay 100 yards away from borrowing, and those who have a clear path of income to repay the borrowed money should not have a problem even if they borrow.

[cxtreenal]

Your friend is involved in gambling in the name of trading and he is taking double the risk here because he has borrowed money for trading and it is at high interest. If a rich trader conduct trading in this way, it may not take long for him to go bankrupt.

Among the people addicted to trading, there are some who really know and understand about trading. They know that trading is risky and are careful in fund management. They do not allocate money beyond their means, but those who make reckless decisions take risks equivalent to gambling.

However, I think that if you have financial backup / risk-tolerant financial management / can strictly follow the stop loss strategy, you can take risks in trading, and as a result of this risk, you can become a successful trader in the future and get high profits.

[Cryptmuster]

Borrowing money and trading with it is not a bad thing in any way, but it should be done with enough opportunity to repay it later, otherwise the borrowed money will have to be paid back twice as much in interest later. However, if someone borrows money and trades carelessly with that money and loses money by trading futures, then it will definitely be a risky job for the borrower. If someone borrows money at high interest and starts trading incorrectly or loses money by trading futures due to excessive greed, then the path to bankruptcy will be cleared for him. Therefore, those who cannot repay the money should stay 100 yards away from borrowing, and those who have a clear path of income to repay the borrowed money should not have a problem even if they borrow.

I think the problem should be looked for right at the beginning. If a trader finds himself in a situation where he needs money to trade and is willing to borrow it, then that is where the problem lies. Most likely, he has already lost all his own money and is now looking for somewhere to get additional funds to keep trading.

If you can’t preserve your trading capital and keep losing it, you shouldn’t borrow money, because you’ll most likely lose that money too. Maybe we’re talking about a successful trader who doubles his trading capital, makes a significant profit, and starts thinking, with more money I could make more. In that case, it might be worth testing, but trading with borrowed money is more difficult because you’ll have additional pressure from having to repay the debt and pay interest on it.

[Halifat]

I think the problem should be looked for right at the beginning. If a trader finds himself in a situation where he needs money to trade and is willing to borrow it, then that is where the problem lies. Most likely, he has already lost all his own money and is now looking for somewhere to get additional funds to keep trading.

I get your point correctly because if he has not lost everything why would he think of borrowing money to trade, I definitely go against this because with the look of things I see that is just trying to chase his loss by borrowing money to continue trading, when a person behaves like this, I don't consider him a trader but a gambler because it's only people that gamble behave this way.

If you can’t preserve your trading capital and keep losing it, you shouldn’t borrow money, because you’ll most likely lose that money too. Maybe we’re talking about a successful trader who doubles his trading capital, makes a significant profit, and starts thinking, with more money I could make more. In that case, it might be worth testing, but trading with borrowed money is more difficult because you’ll have additional pressure from having to repay the debt and pay interest on it.

I also have this thought, normally it is very wrong for a newbie to borrow money to trade, this is a general rule regarding any type of investment you want to do. People that really need to borrow are those that are in the system for a very long time and they are trying to expand their investment, these are the people that can be able to face that without panicking in any way because they have alternative plans.

[Floxynice]

I said "never borrow to start a new business from scratch". A new business is full of uncertainty and you are not sure yet if it will be profitable. People borrow to start a new business, but it is very risky, your chances of repaying depends on the success of the business.  The best way to borrow to support your business is by borrowing for expansion purpose. At this stage, you are more certain about the business and can still repay.

Unless I did not understand you very well, there are rich people that borrow money on business that they have not invested on before and they started it from scratch. They make their calculations and tried their luck if the calculation is positive. Another thing is that there are different kinds of loan, not all are the interest so huge like the banks interests. There have been people that make it in life through loan if the business boom. And there are people that were unable to pay back the loan if the business is not profitable.

Before taking a loan, you should be very certain that you will be able to repay the loan within the duration of the loan. It is a wrong practice to try your luck with borrowed money. People do it, but that doesn't make it right. People borrow money to start a business, it is totally fine if they have other means through which they intend to pay the money. But if they are relying only on the business, then it is not good at all. It is up to you if you want to borrow money for your new business. This is all I can say under this conversation.

[Bd officer]

I get your point correctly because if he has not lost everything why would he think of borrowing money to trade,

It could also be that a newbie has acquired knowledge about trading, but they don't have enough money to trade, so they may decide to borrow out of greed. I have heard many stories of new traders who didn't have enough money, but borrowed money to trade and lost money.

I don't understand why people borrow to trade? You shouldn't invest more than you can afford to lose. Should you borrow money to trade? Now you may be a professional trader but you can't guarantee to make a profit, so you should be careful about borrowing.

[Olatundespo]

I said "never borrow to start a new business from scratch". A new business is full of uncertainty and you are not sure yet if it will be profitable. People borrow to start a new business, but it is very risky, your chances of repaying depends on the success of the business.  The best way to borrow to support your business is by borrowing for expansion purpose. At this stage, you are more certain about the business and can still repay.

Unless I did not understand you very well, there are rich people that borrow money on business that they have not invested on before and they started it from scratch. They make their calculations and tried their luck if the calculation is positive. Another thing is that there are different kinds of loan, not all are the interest so huge like the banks interests. There have been people that make it in life through loan if the business boom. And there are people that were unable to pay back the loan if the business is not profitable.

Before taking a loan, you should be very certain that you will be able to repay the loan within the duration of the loan. It is a wrong practice to try your luck with borrowed money. People do it, but that doesn't make it right. People borrow money to start a business, it is totally fine if they have other means through which they intend to pay the money. But if they are relying only on the business, then it is not good at all. It is up to you if you want to borrow money for your new business. This is all I can say under this conversation.

I advise most investors not to borrow. Invest as much as you can afford from your own funds. There is a mandatory position regarding repayment of loans, due to which you will always be under mental stress. Considering both working beyond your physical capacity and mental stress, you can fall into a state of physical distress.

The purpose is to make a profit or even if you think there is a way to earn money for sure, you cannot be perfect because there will be uncertainty about the future. Borrowing for trading purposes will create more risk for you because the value of that coins may decrease in the future but you will have to repay the loan on time.

Along with repaying the principal of the loan, you will have to pay high interest and it will increase in the form of compound interest over time. It is better not to borrow for investment or for any other purpose. It is a good decision not to borrow even though there is a mechanism for repaying the loan because you may face an emergency at any time and you may need a lot of money to get out of that situation. Carrying interest on borrowed capital is even more painful because it continues to increase in the form of compound interest until you pay it off.

[PostQuantumBTC]

Before taking a loan, you should be very certain that you will be able to repay the loan within the duration of the loan. It is a wrong practice to try your luck with borrowed money. People do it, but that doesn't make it right. People borrow money to start a business, it is totally fine if they have other means through which they intend to pay the money. But if they are relying only on the business, then it is not good at all. It is up to you if you want to borrow money for your new business. This is all I can say under this conversation.

About trying ones luck, businesses are not gambling. But I agree with the remaining part of your post. People can borrow but they should have guaranteed source of income which they can use to pay the money back and not rely on the money borrowed to pay the money back. Anyone that is relying on the borrowed money to pay back the loan is foolish and not a good business person.

I advise most investors not to borrow. Invest as much as you can afford from your own funds. There is a mandatory position regarding repayment of loans, due to which you will always be under mental stress. Considering both working beyond your physical capacity and mental stress, you can fall into a state of physical distress.

We have discussed beyond this. I can not repeat what I have posted before.

[Solokan]

Even though he is above average in trading, like he is already a profitable trader, it's not a wise decision to borrow money with the sole purpose of using the money to trade, that will never end well because of the additional pressure loaned money brings. When you take a loan, you are going to have a fixed date when you are going to repay back the loan, so you will want to trade every moment, even when their is no clear trading setup, just because you want to start making profit to be able to repay the loan, so you are going to lose money in the market unnecessary because you will be impatient, and once you are impatient, you cannot survive long in the market.

In addition, trading is best done with an amount you can afford to lose, so that you can control your emotions, but since the loan money is what you cannot afford to lose you will be unable to control your emotions when trading, which will make you blow your account easily.

Yes even if you have good trading skills, it's very dangerous to use borrowed money for trading. It will definitely affect your mental state and there's a significant potential for loss. However your friend might not dare tell you that they want to borrow money for trading as they'll know you'll definitely forbid them from doing so

However for those who enjoy trading and don't have the capital there are times when they want to borrow money for trading However this is a trap that can potentially lead to further losses leading to unrest when experiencing losses due to trading with borrowed money

[Oshio-man]

link=topic=5590647.msg67020691#msg67020691 date=1786115975
When he wanted to borrow, the did not tell me, I would have advised him not to borrow the money.

Even though he tell you that he want to borrow, do you think he will listen to your advise? He will not because his major target is to recover all his losses from trading and still have opportunity to earn more income from the trading, now that he has experienced a lot of losses from crypto trading, I guess he will know the cost of the losses because if you understand crypto trading very well you suppose know the type of coin you will involve your funds that will make you to earn income when you trade them out.

[citywise2]

What borrowing money to trade does to the trader is that he is always anxious and searching the market up and down for an opportunity to make some money because at the back of his mind is the loan he has to repay. Soon that would get him tensed up and on edge and there is no way anyone can make profit in the market with such a disposition because you need your concentration and peace of mind to be able to function well in the market.

[Webutxo]

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.

How can a person with $1000 dollar account blow up their account. People amazed me when they say they are traders but don't know how to use stop loss and if they use stop loss and have all the account gone, then they don't know how to trade. A person that knows how to trade with $1000 account balance will trade and have profit and when the market is unpredictable, their loss are not that hard to handle, they can't waste the total account on stop loss.

I think your friend is that guy that saw people making money from trading, he was interested in trading too and he wanted to take advantage of the market and you know as the way the market is looking, it's not yours to take if you don't understand how the market work. You must be fully prepared with knowledge, you must understand how the smart money work, understand trend lines and what is behind the market.

[Leahized]

How can a person with $1000 dollar account blow up their account. People amazed me when they say they are traders but don't know how to use stop loss and if they use stop loss and have all the account gone, then they don't know how to trade. A person that knows how to trade with $1000 account balance will trade and have profit and when the market is unpredictable, their loss are not that hard to handle, they can't waste the total account on stop loss.

Having $1000 dollars in the account does not mean that he is an experienced and prudent trader. Any new trader can have this amount in his account but he will never be able to trade properly. Because he has not studied enough to trade precisely. That's why every move he makes is wrong and every analysis he makes is flawed. Therefore, these aspects should be corrected before trading.

It is completely wrong to think that using a stop loss will completely protect against losses. If can reduce some risk at times but experienced traders do not always use this strategy. Because they are good enough to monitor the market and do it with precision. However, it is always better to avoid using high leverage.

[nara1892]

First, trading with borrowed money can never be justified. Why? Because trading is an analytical activity that requires a clear, calm mind you must avoid rushing. When you use borrowed money as capital, the thought of paying it back quickly will likely constantly haunt you, and that can disrupt your peace of mind.
Second, there are two possible reasons why your friend keeps losing money on trades, either he hasn’t truly learned from his mistakes, or this is a process in which he still needs time to improve.

[GIF-JOBS]

What borrowing money to trade does to the trader is that he is always anxious and searching the market up and down for an opportunity to make some money because at the back of his mind is the loan he has to repay. Soon that would get him tensed up and on edge and there is no way anyone can make profit in the market with such a disposition because you need your concentration and peace of mind to be able to function well in the market.

And so much worry and mental stress has a direct negative impact on his market research, due to mental instability, he has to face many problems in adopting the right strategy, due to which his trades are often wrong, and in this way he has to end up in a lot of losses. He can never profit by trading with the money he came to trade with on loan, rather he also loses it through it and as a result he becomes more financially indebted, and this only pushes him towards a worse situation in all aspects.
So in the case of trading, you must be careful about these things, since it is a very risky place, so you must be careful about finances, and another thing is that do not try to get rich overnight through trading, because it is much more terrible than you think, which can lead you to ruin.

[Cyber_warrior]

First, trading with borrowed money can never be justified. Why? Because trading is an analytical activity that requires a clear, calm mind you must avoid rushing. When you use borrowed money as capital, the thought of paying it back quickly will likely constantly haunt you, and that can disrupt your peace of mind.
Second, there are two possible reasons why your friend keeps losing money on trades, either he hasn’t truly learned from his mistakes, or this is a process in which he still needs time to improve.

You are right, trading didn’t need rush decision and in this situation where the money is been borrowed to trade the of course the mind won’t be at rest instead it will be filled with the tension of how to get the money paid so no room for mistakes and that a wrong idea.
The moment we begin to trade with caution and avoid mistake that the moment things won’t go as planned and mistakes can easily occur but when the mind is at total peace and no targets in mind to reach before any time then we can get to execute properly but it also requires knowledge and constant practice.  And not that alone but also learning from our mistakes.