Take a Loan to Trade?

Would it be advisable to take out a loan and use that money to make speculative trading positions in the Forex market?

No. Not a good idea. Risk on top of risk.

Never trade with money you can't afford to lose! Can you afford to lose the entire loan amount? If you have to borrow money to start trading I doubt it

Cliff notes: NO!

Well, theoretically you could do it. If you have a good strategy, money management, your patient, have allready live trading experience and made some gains...

But its double the pressure, if you start losing money, its not only a loss, its losing money which you do not have...

I would honestly say this depends on the trader. If you have a proven profitable track record (of a minimum 2 years) and your returns exceed the cost of the money borrowed then yes.

This is no different than how any other business is operated. We call it OPM. Quite simply put just as you use leverage in the market on your margin you leverage OPM to create returns to catapult your business to a higher level of profitability allowing you to continue to grow.

Now there's going to be a ton of people who say "that's a bunch of crazy talk"

So here's a scenario:
You have a proven profitable system that has consistently provided you with 30% annually.

You take out a loan at a rate of 12% APR.

You operate your business with the new input of equity for 2 years. You've paid off the loan and set your business on a path destined for continued growth at a rate that was faster than doing it only with start up capital from your own pocket.

But again you have to have a proven profitable track record. Otherwise you are destined for ruin.

Sure. People borrow money to open businesses all the time. People will tell you that trading is different, that your emotions, fueled by the idea that you're in debt, will be a detriment to your trading.

However, I fail to see the difference between that and someone who borrows money to open any other business. In the end, you're in debt in order to create a business. Does someone in this position feel less pressure? I don't think so.

I will note that a massive difference though is the time scale involved. If you open a restaurant, it could take many months before you go out of business. In trading, you can go out of business in a day. That's a huge factor. That being said, if you were the type that would burn an account in a short time, then you were doomed to fail no matter where the money came from. If you have proven to yourself that you can trade consistently and you need to raise capital to make trading worthwhile, then borrow the money.

I think the reason so many will say no is because they're thinking about it from the viewpoint of someone who can't trade (even though they think they can). I agree that these people shouldn't risk more than what they have. But, again, if you can trade, get some cash. Trading OPM (someone else's money) is the ideal situation, but it's not easy finding investors.

Start small. Borrow a few thousand. Give yourself a timeline. If in the end the money you've borrowed is growing, then go get some more.

Finally, the vast amount of advice a person will ever receive when positing something involving risk will be negative. Those who have taken risks and succeeded got plenty of it...but they ignored it. A risk is a risk is a risk. Take some, it makes life interesting.

Get out of my head!!! LOL

We are are on the same page here totally. I have run a successful business, been a partner in a successful business and I have run a couple of real duds too. But they all had one thing in common "RISK"

Accept the risk and drive on!

Nice to see someone else shares the same view

Risk inside of risk inside of risk, Riskception.

That is the same thought I had when I read your post.

I think taking a loan to trade would just be stupid personally.. but I see people doing it constantly

even trading forex they are letting you borrow money for leverage.. but I suppose they got that capped to prevent additional loses

If you have been profitable for 5 years, at least 20% per year but you play four figure account and dont have more liquid capital - then yes, maybe.
But even then on a condition that you would be able to get out of debt if you lose - you have something to sell, a car, dead grandmas gold and jewels or whatever that are worth more than a loan amount. (Well, don´t sell your wife, kids or kidney ).

But being "a trader" for some month or even few years, no matter the profit - NEVER.

I took a risk, a BIG risk by borrowing 3,000 dollars from my credit card last year. I was 21 at the time. Because i had used demo trading for awhile with astrategy that i was CONFIDENT with. I am niw 22 and have well made more then what i started with and paid the card off. Key is as some other members have said, that having patience, not trading on emotion, and money management are essential to success in the forex market. I am blessed to be where i am today at my age, but at the same time i wouldnt have been where i am currently if i didnt take that risk. That was my choice and it worked. So its up to you, your financial situation, amd your strategy. Goodluck

Provided you are a good trader, then borrowing money is a great idea. If you are not a good trader then it is a bad idea. Just ask yourself one question. If you start any business, and you look for finance, you are going to make sure you have done your homework and planned your business success. If you have a plan and a proven strategy then yes borrow the money, if you are going to make a purely speculative trade with a do or die attitude then thats not the way to trade. Every business man out there takes risks, the key is to control the risk, the plan, and know when to move.

All the best


Mike

The only things I have found in life for free are advise & kittens. I have had much better experiences with the cats. - Lou

Yes. Banks do it all the time. When you get it wrong, though, don't expect a bail out. That's the difference.

Go for it!

Thats it... Im applying for every CC I can get my hands on and dump em into my FX account...

If I lose it all... Ill just file BK, wait a few years and do it again... Gotta love the system.

lol Im JK. It is a good idea to trade OPM like the other posters said if you have a proven track record and a profitable system. Common sense prevails here friends.

Wulf

Well, just tell me your name so I can be on the lookout for when you throw yourself out the window and make at least a headline under local news.

Maybe you need some pills 1st before taking a loan. Like the movie "Limitless". Whoever had watched this would understand how brave he is to take the loan for stock investment. Haha....

Never take loan for a risky business like forex trading. It is because you can't give the surety of making profit from this money. It can make you more frustrated. I know forex trading is like an addiction for some trader and they can do anything to trade in forex but it is very important to control our emotion and to realize the reality.

I am 100% agreed you don't have to invest the money which you not have and would affect double to you. But in my opinion you can start with little amount.