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Borrowing money to fund your trading account,Good/Bad
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Borrowing money to fund your trading account,Good/Bad

  #21 (permalink)
Membership Revoked
los angeles
 
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isnt Europe and the USA running on the borrowed money principle?.....ouch.

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  #22 (permalink)
Elite Member
Greensboro NC
 
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Rad4633's Avatar
 
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wldman View Post
as a sole prop is not a "business" in any of the typical ways. The pundits that say treat your trading like a business are de facto correct, but most of them have never done anything tangible in the market.

A typical business has a "product" that is typically exchanged for money with a second party know as customers...trading is none of that. No service, no product and no customers means no exchange for money.

Trading should be self funding past an initial investment...and it does not to be anywhere near $100,000. A $5,000 account traded well is a $10,000 account in 90 days because we have leverage on our side...we make money using other peoples money.

Anyone who uses non-risk capital to start trading as a non classified sole prop is, in my opinion either lunatic or delusional. PLEASE PLEASE PLEASE do not do that. Risk capital defined as non financed actual dollars that you could live without and not miss if totally gone.

This is the hardest easy money in the world and while the successful consistent result attained by a VERY few looks glamorous, this is a bare knuckle back alley way to earn a living. The fool hearty, the unprepared, the arrogant, the easily discouraged, the thin skinned, the expert programmer with all the answers and no experience, the pop psychology trading author devotee's, the SIM trade heroes, awesome indicator groupies, and many other stereotypical sub groups are daily led to their demise and financial ruin.

Get a clue (education through experience) and build confidence with risk capital. If that means trading one lot micros with a $400 account so be it. If you can trade you will find a way. Build that account and routinely pay yourself. Lose $400 and find another $400. Keep your day job and never ever bring borrowed money or money required to operate your household to the table.

gotta stop.

NO borrowed money ever.

wldman-you answered directly to my question in your opinion and not me ,Ty and I have no reply I agree...And trust me I read this more than a few times before replying back...

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  #23 (permalink)
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Rad4633's Avatar
 
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Private Banker View Post
Some of the most successful traders got started with a stake from someone else. So the thought of borrowing money to trade isn't entirely unheard of. The question is how are you going about it?

Are you working with a mentor as the previous poster referred to where they have direct oversight of what you're doing?

Or are you looking to borrow against your personal assets/credit from a bank to fund a trading account?

If your answer is the later of the two, what is your track record and experience in trading?

My point here is there are two types of scenarios that can play out here. One would be that you're an experienced trader. You've been successful for an extended period of time and would look to increase your working capital, etc. The other scenario which is less favorable, would be that you have very little to no experience in trading and are borrowing the money on more of a pipe dream. Its pretty clear to see who would most likely be the more successful of the two.

Another consideration is and I'm not giving you personal legal or financial advice here but something that I am familiar with which is, under what structure are you operating your business and borrowing the capital? I personally operate my trading within LLCs. The reason for that is paramount in that I'm separating my business' liabilities away from my personal liabilities and vice-versa.

My point here is similar to what others have eluded to. If you have no experience of extended success and are just looking to fund or increase your trading capital by taking a straight forward mortgage against your primary residence or personal loan or credit line (card) borrowing under your personal name or sole proprietor name, you're putting yourself/family into a potentially dangerous financial position should you fail to service that debt. Not only will you have failed at trading but you will be financially destroyed. I knew a guy during the dot com boom days that advanced cash off all his credit cards and invested it all in tech stocks. He did extremely well at first but then when different market conditions came along, he ended up getting nailed. On the flip side, I know another guy that took all of his credit cards and did an advance and bought a multi-unit condo building which turned into a multi-million dollar reward. Do you want to know what the difference was between the two of them? The tech stock guy had no idea what he was doing while the other guy knew real estate very well by working in the field as a realtor and finally went for it. There of course is luck involved but I think you'd get my point.

PB its always a pleasure to hear from you, you ask all the correct questions and give logical replies. Also yes the LLC is something I must do soon thanks for the reminder, Most all my other ventures have been LLC's unless C or S were better suited.

I sand bag alot on futures.io (formerly BMT)(sand bag is a drag race slang for not showing all youve got)Ive always been a aderinaline junkie, fast is never fast enough. That was my slogan.another business story from years ago.You know Im in Nascar central and drag race heaven, We have the only 4 lane drag strip in the country.30000 hp going by is like nothing your body has ever felt before... Anyhow moving on

Mentor-no direct oversight, but for me Ive never had teachers I watch and learn. One has to know how to acquire information needed to complete any task at hand. The key is surrounding yourself with experience and applying the experience correctly. Am I close with a very respected Master, yes I can not ever thank him enough for his words of wisdom, people speak of the pressure of having business loans and how this can affect you emotionally. Yes I agree but then we mature and learn to control it. The only thing Ive been emotional about lately is what costume my Gf is going to want me to dress up as for Halloween..Geez. Now Im going throw @Big Mike in here as a example dont want to go on bout me. As a ie. every time someone threatens futures.io (formerly BMT) with legal action. Does Mike get emotional worried about the what if this happens etc he follows his protocol and what follows will be handled by the next protocol. See how easy this is.No emotion needed worrying about what if's isnt needed, have a plan and follow it everything will work it self out...BUT always be prepared. Did we all enjoy our first presidential debate?

Funding, have always had a funded account, trade live and traded live from get go... going on 4 yrs ago, so Ive got experience, have I blew accounts yes many times, Have I doubled accounts the same. How is my trading different today than beginning, manage contract size per account,know key levels etc I sorta do the Martingale strategy now and then on losers, depends on my probability for that trade, but 3 times Im done for that day.

Track record-bad,good,bad good ,bad, great sorta bad, Wow,slacking,focused,ummm Im getting much happier.... that sums it up.

scenario which would play out, Im a fairly confident guy and weigh my odds. I enjoy learning from everyone, no matter if someone has different view from me I try to understand how and why they do what they do.


In closing PB Ty for your reply, hope you have a great night

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  #24 (permalink)
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Futures Operator View Post
@wldman, thank you for a great post. Interesting point that with leverage, we are already trading using other people's money.

I'd be curious to hear your thoughts on starting out trading other people's money with size, through a prop like TST, where you don't put up your own capital, but give back 30-40% of profits, as opposed to starting out small on your own and building up over time (given competency in both cases).

I was thinking about this very thing today after @PandaWarrior mentioned using TST. I dont know enough info to reply at this time about TST. But for one I would suspect the actual numbers of traders that are in on the program is very very small number(ones that have completed coarse and are trading with TST monies). I would also speculate they are over seen by a TST account manager that can over ride them at anytime.ok duh this is a given. The business model makes sense , but what is the REAL business model. Time to do research

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  #25 (permalink)
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Rad4633 View Post
This is for laughs, what do we call a well funded trader whose accounts are depleted

@Rad4633

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I'm just a simple man trading a simple plan.

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  #26 (permalink)
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There are times when it makes sense to take on the risk of the debt. However, sometimes patience can replace the need for debt. In trading, for example, if you have a good strategy and you are growing your account over time, then one day you will not need that $100K loan to start your trading business. If on the other hand you cannot grow your account, then adding more positions with a $100K loan will only create more problems for you.

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