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Pro's and Con's: Trading with other people's money
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Pro's and Con's: Trading with other people's money

  #1 (permalink)
Site Administrator
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Pro's and Con's: Trading with other people's money

Hi guys,

New poll and discussion:

Trading with other people's money (check all that apply)

 


Does trading with other people's money make things easier or harder? Is it a good idea, or a bad one?

What are the psychological benefits and downsides?

Why would you want to trade other people's money, vs trading your own?

Does it make it easier/harder if the money is from a family member, vs being from a prop trading firm?

Please vote and discuss.

Mike

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  #2 (permalink)
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  #3 (permalink)
Site Administrator
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Hey guys,

Does trading with other people's money make things easier or harder? Is it a good idea, or a bad one?

What are the psychological benefits and downsides?

Why would you want to trade other people's money, vs trading your own?

Does it make it easier/harder if the money is from a family member, vs being from a prop trading firm?

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

Reply With Quote
 
  #4 (permalink)
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I've only ever traded my own money but I imagine it would be very difficult to trade family or friends money. I assume the money would be given to you on the understanding that you know what you are doing. This involves a certain level of expectation and therein lies complications such as a loss of reputation and trust, on top of which it could be very damaging to your ego should you lose. I don't think I would care if it was prop money as there would be no personal consideration to contend with.

On the question of it being good or bad I have two thoughts:

It is a bad idea if you have not proven yourself in a live environment on the hard right edge, and are either using family or friends money attempting to recover your own past losses or simply taking a chance that this time it is going to work.

Good idea if you have a proven record in a live environment on a consistent basis and the people fronting the money are well aware of the risks involved ie. That they could lose it all.

So in my opinion it depends but I lean towards it being harder psychologically.

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  #5 (permalink)
Market Wizard
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Big Mike View Post
What are the psychological benefits and downsides?

All downside. Responsibility. Pressure!


Big Mike View Post
Why would you want to trade other people's money, vs trading your own?

Because most people don't have enough of their own money.

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  #6 (permalink)
Market Wizard
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Big Mike View Post
Hey guys,

Does trading with other people's money make things easier or harder? Is it a good idea, or a bad one?

What are the psychological benefits and downsides?

Why would you want to trade other people's money, vs trading your own?

Does it make it easier/harder if the money is from a family member, vs being from a prop trading firm?

Mike

I would be willing to trade a prop firm's money because the relationship would be purely a business one, and all parties would be aware of the risks and realities of trading. I wouldn't feel bad if I lost their money, and they wouldn't feel bad if they canned me.

But would I want to have a friend or family member say to me, "I was going to use the money you lost for my retirement?" Nope. Not even if we had discussed the risks a hundred times. Just nope, I wouldn't want to be there.

And since I wouldn't want to lose anything, I doubt that I would trade very well either.

Not a good psychological position to be in.

Bob.

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  #7 (permalink)
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johny1971's Avatar
 
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Trading OPM

My first response, gut instinct, is that trading is not about money. It is about a process and just keeping that process going and improving upon it.

But, with the money involved somehow.

If I traded someone else's money, and I pretty much do that, I would let them know it could all go up in smoke, maybe even faster than they could imagine. I would make sure they understood the concept of risk capital. If they did, after having them sign a notarized agreement at the least, I would discuss what would be done if capital is lost and what would be done if capital is gained. It would be entirely up to them when to stop. And, I would remind them any capital is always at risk and there can be drawdowns. I would be very careful that my job relative their money would be just attempting to make more money, not managing it, ie I would be very hyper-vigilant about responsibility-creep.

Maybe I would tell them to read Fooled by Randomness.

Also, I would set it all up as their account so if the black swan swooned down it would be all on them.

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