NexusFi: Find Your Edge


Home Menu

 





Borrowing money to fund your trading account,Good/Bad


Discussion in Traders Hideout

Updated
      Top Posters
    1. looks_one Rad4633 with 9 posts (7 thanks)
    2. looks_two ThatManFromTexas with 2 posts (11 thanks)
    3. looks_3 PandaWarrior with 2 posts (9 thanks)
    4. looks_4 josh with 2 posts (7 thanks)
      Best Posters
    1. looks_one Private Banker with 7 thanks per post
    2. looks_two ThatManFromTexas with 5.5 thanks per post
    3. looks_3 PandaWarrior with 4.5 thanks per post
    4. looks_4 josh with 3.5 thanks per post
    1. trending_up 18,118 views
    2. thumb_up 70 thanks given
    3. group 11 followers
    1. forum 25 posts
    2. attach_file 0 attachments




 
Search this Thread

Borrowing money to fund your trading account,Good/Bad

  #1 (permalink)
 
Rad4633's Avatar
 Rad4633 
Greensboro NC
 
Experience: Advanced
Platform: TOS/ NT Dorman
Trading: ES TF CL
Posts: 1,357 since Sep 2011
Thanks Given: 2,657
Thanks Received: 894

In a recent reply in another thread, a comment was made dont borrow money to trade with. I have gave this thought many times before because I have read it over and over on futures.io (formerly BMT)

Anyone that has ever started a small business knows a start up of 100k is minimum, so if the same is applied to trading being a business, whats the difference? People mortgage their homes, max credit cards, borrow against equity, cash out IRA and so on to fund a new start up a small business.

The risk are the same, the pressure is the same, the stress is the same. 95% of small business fail 95% of all intra day traders fail. So whats the reason why everyone says dont borrow to fund your trading business? Now I need to say this most people who start a small business have experience in that area, so assume the trader has experience in trading, already past the learning stage. Ive learned to clarify on futures.io (formerly BMT) to prevent more discussion than was needed for a answer. Have I considered doing this yes,I like size figured I throw it out to see how the majority thinks.whats ur thoughts? Because honestly I dont see the difference because business is business, you make it,go bankrupt, or earn a salary.

Visit my NexusFi Trade Journal Started this thread Reply With Quote
Thanked by:

Can you help answer these questions
from other members on NexusFi?
The space time continuum and the dynamics of a financial …
Emini and Emicro Index
NexusFi Journal Challenge - April 2024
Feedback and Announcements
Exit Strategy
NinjaTrader
Deepmoney LLM
Elite Quantitative GenAI/LLM
NT7 Indicator Script Troubleshooting - Camarilla Pivots
NinjaTrader
 
Best Threads (Most Thanked)
in the last 7 days on NexusFi
Get funded firms 2023/2024 - Any recommendations or word …
61 thanks
Funded Trader platforms
39 thanks
NexusFi site changelog and issues/problem reporting
26 thanks
The Program
18 thanks
Battlestations: Show us your trading desks!
18 thanks
  #3 (permalink)
 
PandaWarrior's Avatar
 PandaWarrior 
In the heat
 
Experience: None
Posts: 3,165 since Mar 2010
Thanks Given: 6,329
Thanks Received: 13,404



Rad4633 View Post
In a recent reply in another thread, a comment was made dont borrow money to trade with. I have gave this thought many times before because I have read it over and over on futures.io (formerly BMT)

Anyone that has ever started a small business knows a start up of 100k is minimum, so if the same is applied to trading being a business, whats the difference? People mortgage their homes, max credit cards, borrow against equity, cash out IRA and so on to fund a new start up a small business.

The risk are the same, the pressure is the same, the stress is the same. 95% of small business fail 95% of all intra day traders fail. So whats the reason why everyone says dont borrow to fund your trading business? Now I need to say this most people who start a small business have experience in that area, so assume the trader has experience in trading, already past the learning stage. Ive learned to clarify on futures.io (formerly BMT) to prevent more discussion than was needed for a answer. Have I considered doing this yes,I like size figured I throw it out to see how the majority thinks.whats ur thoughts? Because honestly I dont see the difference because business is business, you make it,go bankrupt, or earn a salary.

Lots of funds are started with borrowed money. Almost all of the big ones use not only the leverage available in the market but also leverage borrowed money. Is this wise? Only time will tell but when they blow up, they blow up big.

I think borrowing money to start a trading business is fine with the caveat that all the participants know what its being borrowed for. The local bank that asks what the money is for won't respond well if you tell them the 100K is for a futures trading account. On the other hand, a wealthy relative might respond better if they know what you are doing and is comfortable with the risks.

Like all things, there is no one correct answer here. Its whats best for you and your family given your current circumstances.

I think a better option would be to qualify for a program like TopStepTrader. Same 100K but no real risk to you other than your entry fee. Plus you get professional back office support. Something to think about.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
Reply With Quote
  #4 (permalink)
 
josh's Avatar
 josh 
Georgia, US
Legendary Market Wizard
 
Experience: None
Platform: SC
Broker: Denali+Rithmic
Trading: ES, NQ, YM
Posts: 6,216 since Jan 2011
Thanks Given: 6,752
Thanks Received: 18,136


Rad4633 View Post
Anyone that has ever started a small business knows a start up of 100k is minimum, so if the same is applied to trading being a business, whats the difference? People mortgage their homes, max credit cards, borrow against equity, cash out IRA and so on to fund a new start up a small business.

The risk are the same, the pressure is the same, the stress is the same. 95% of small business fail 95% of all intra day traders fail. So whats the reason why everyone says dont borrow to fund your trading business?

I would challenge your first statement; this is very dependent on the business, and certainly $100K is not a minimum for many businesses.

Running a business in debt for most adds more pressure, more stress, and can potentially lead one to make decisions that are based in fear and worry, because he is working with money he cannot afford to lose. The fact that most people do it is all the more reason to do one's best to trade with capital they own, that is not owed. Most people think nothing of running up credit cards, but then they realize they are in deep crap once they get too far behind.

Anyone who mortgages his home to start a business needs to rethink his sanity and business logic.

Reply With Quote
  #5 (permalink)
 
MWinfrey's Avatar
 MWinfrey 
Lubbock TX
 
Experience: Intermediate
Platform: NinjaTrader
Broker: Stage 5 Trading
Trading: CL
Posts: 1,878 since Jul 2009
Thanks Given: 1,450
Thanks Received: 3,335


josh View Post
Running a business in debt for most adds more pressure, more stress, and can potentially lead one to make decisions that are based in fear and worry, because he is working with money he cannot afford to lose. The fact that most people do it is all the more reason to do one's best to trade with capital they own, that is not owed. Most people think nothing of running up credit cards, but then they realize they are in deep crap once they get too far behind.

Anyone who mortgages his home to start a business needs to rethink his sanity and business logic.

I agree...I suspect most businesses that fail do so because of cash flow problems which is compounded by the amount of debt they have. I don't know this as a statistical fact but I know from personal experience of having owned a small business and seeing that issue from a number of businesses I supported.

Reply With Quote
Thanked by:
  #6 (permalink)
 
PandaWarrior's Avatar
 PandaWarrior 
In the heat
 
Experience: None
Posts: 3,165 since Mar 2010
Thanks Given: 6,329
Thanks Received: 13,404


josh View Post

Anyone who mortgages his home to start a business needs to rethink his sanity and business logic.

Taking a risk to start a business of any kind is insane. Anyone thats every done so will tell its the most fun and the most stressful thing they've ever done. But the truth is this country was built by risk takers not afraid to lose it all in the pursuit of their dreams.

So yes, mortgaging anything to start a business is nuts, but its the way things get built in this country. Not everyone gets an angel investor. In fact, most don't.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
Reply With Quote
Thanked by:
  #7 (permalink)
 
ThatManFromTexas's Avatar
 ThatManFromTexas 
Houston,Tx
 
Experience: Advanced
Platform: NinjaTrader
Broker: Mirus Futures/Zen-Fire
Trading: TF
Posts: 2,265 since Feb 2010
Thanks Given: 1,206
Thanks Received: 4,348


Rad4633 View Post
In a recent reply in another thread, a comment was made dont borrow money to trade with. I have gave this thought many times before because I have read it over and over on futures.io (formerly BMT)

Anyone that has ever started a small business knows a start up of 100k is minimum, so if the same is applied to trading being a business, whats the difference? People mortgage their homes, max credit cards, borrow against equity, cash out IRA and so on to fund a new start up a small business.

The risk are the same, the pressure is the same, the stress is the same. 95% of small business fail 95% of all intra day traders fail. So whats the reason why everyone says dont borrow to fund your trading business? Now I need to say this most people who start a small business have experience in that area, so assume the trader has experience in trading, already past the learning stage. Ive learned to clarify on futures.io (formerly BMT) to prevent more discussion than was needed for a answer. Have I considered doing this yes,I like size figured I throw it out to see how the majority thinks.whats ur thoughts? Because honestly I dont see the difference because business is business, you make it,go bankrupt, or earn a salary.

@Rad4633

Disclaimer: This post does not represent the view point of the owners, managers, or moderators of this web site and is not intended as a slam against any moderator, board member, any banned former members whose name we dare not say, any other living person, any recently living person or any person or persons whose status we are not sure of and especially not for any platform vendor with a questionable product and a pit bull lawyer. This post is meant purely for entertainment and should not be confused with a real thought.

I am not a programmer, coach, trainer or self appointed guru and do NOT hold myself up to be a good example for anything. I do not have a book, trading room or seminar. Have a professional review any code you receive from me before you trade real money with it. There is a high risk of loss trading futures. I am not responsible for any losses incurred trading real money with any code you receive from me .Even though I have an opinion on every subject under the sun, I do not give financial advice. Nor should I be held responsible for feeble attempts at humor at your expense.


That said....

1. Your mortgage analogy doesn't hold water.... If your home is foreclosed on .... your credit is shot... but you don't owe the bank any more money . You borrow money and lose it trading... you still owe the money.

2. No one in their right mind would loan you $100,000 to start a business where ... you have no "skin in the game" .... you offer no collateral .... and you have no experience making money doing what the start up business does .

3. If you do decide to rob your 401K .... or bet the farm ... or max out your credit cards ... please let me know so I don't write you any more indicators... I don't want to be an enabler

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

My daddy always said, "Every day above ground is a good day!"
Reply With Quote
  #8 (permalink)
 
josh's Avatar
 josh 
Georgia, US
Legendary Market Wizard
 
Experience: None
Platform: SC
Broker: Denali+Rithmic
Trading: ES, NQ, YM
Posts: 6,216 since Jan 2011
Thanks Given: 6,752
Thanks Received: 18,136


PandaWarrior View Post
So yes, mortgaging anything to start a business is nuts, but its the way things get built in this country. Not everyone gets an angel investor. In fact, most don't.

Risking capital => ok, in my book
Risking place of dwelling => unnecessary

I would say that while the country was built on risk-taking, our predecessors largely did not make a habit of borrowing vast sums of money for unproven things. My grandfather, who is passed away for some time now, never thought of the idea of buying a house with borrowed money, and he saved for decades in order to provide a home for my mother. Just one example, but I think statistics over the last century would show that debt is not an intrinsic part of the US's history. The auto makers never offered a lease when they first started, it was unthinkable that someone would "rent" a car before they could afford to buy it.

The thing is, most people think they need a LOT of money to start a business. How about starting a business small, growing it, and then look to operate from a positive cash flow? It's like the trader who buys 6 monitors and 2 Intel i7's with 14TB server space and he hasn't really started trading yet? I think if a person is tempted to mortgage his house, he should consider that he needs to earn the right to get more capital. What can he do to produce the capital? There are risks, and then there is stupid.

I'm not trying to argue or offend anyone, but I've just heard and seen too many cases of businesses failing simply because they bite off more than they can chew. Start small (or start a different business first), if capital requirements are too high.

Reply With Quote
  #9 (permalink)
 
Rad4633's Avatar
 Rad4633 
Greensboro NC
 
Experience: Advanced
Platform: TOS/ NT Dorman
Trading: ES TF CL
Posts: 1,357 since Sep 2011
Thanks Given: 2,657
Thanks Received: 894


josh View Post
I would challenge your first statement; this is very dependent on the business, and certainly $100K is not a minimum for many businesses.



Running a business in debt for most adds more pressure, more stress, and can potentially lead one to make decisions that are based in fear and worry, because he is working with money he cannot afford to lose. The fact that most people do it is all the more reason to do one's best to trade with capital they own, that is not owed. Most people think nothing of running up credit cards, but then they realize they are in deep crap once they get too far behind.

Anyone who mortgages his home to start a business needs to rethink his sanity and business logic.

@josh- I enjoy us exchanging different views, Im always learning...thx for reply

Agree on 100k statement

Hummm,interesting response. Why would you say mortgaging one home for business is bad, you'll never get a cheaper rate on borrowed money. Most cases its half the rate of a normal loan. I built a custom home few yrs back paid for it upfront had built in equity, then took out a mortgage bc I want my money to make money. I see your point of view. Its all bout security.Who cares if your home is paid for and u cant afford utilities,food,etc what good will that shelter over your head do you then?

Same with business, if one is afraid to borrow against business, then A) its a bad business or B)there is security issues which would lead to decisions that would not be in the best interest for the business.

Credit Cards I love the damn things...No need to box thousands of merchant receipts every yr,CC statement has it all, I get cash back to pay what i would have to anyways so paying Invoices, I make money,Fraud protection most cases you dont get this with a debit card. And we wont even mention 0% for a year in advance, talk bout floating funds for free,yes 4% one time transaction fee but thats nothing. Key to cards is manage them to benefit you

Visit my NexusFi Trade Journal Started this thread Reply With Quote
  #10 (permalink)
 
Rad4633's Avatar
 Rad4633 
Greensboro NC
 
Experience: Advanced
Platform: TOS/ NT Dorman
Trading: ES TF CL
Posts: 1,357 since Sep 2011
Thanks Given: 2,657
Thanks Received: 894



josh View Post
Risking capital => ok, in my book
Risking place of dwelling => unnecessary

I would say that while the country was built on risk-taking, our predecessors largely did not make a habit of borrowing vast sums of money for unproven things. My grandfather, who is passed away for some time now, never thought of the idea of buying a house with borrowed money, and he saved for decades in order to provide a home for my mother. Just one example, but I think statistics over the last century would show that debt is not an intrinsic part of the US's history. The auto makers never offered a lease when they first started, it was unthinkable that someone would "rent" a car before they could afford to buy it.

The thing is, most people think they need a LOT of money to start a business. How about starting a business small, growing it, and then look to operate from a positive cash flow? It's like the trader who buys 6 monitors and 2 Intel i7's with 14TB server space and he hasn't really started trading yet? I think if a person is tempted to mortgage his house, he should consider that he needs to earn the right to get more capital. What can he do to produce the capital? There are risks, and then there is stupid.

I'm not trying to argue or offend anyone, but I've just heard and seen too many cases of businesses failing simply because they bite off more than they can chew. Start small (or start a different business first), if capital requirements are too high.


Josh I couldn't agree with you more on everything you said, my grandfather was my mentor I thought I knew so much. With his passing when I was 27yrs old I realized I knew nothing. Thats why I believe there is no substitute for experience. We AGREE yay hand shake. Now last part depends on how fast you want to grow capital

Visit my NexusFi Trade Journal Started this thread Reply With Quote




Last Updated on June 8, 2014


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts