Bad idea or a smart solution?

[JoePaterno]

Quote from d-rock1080:

A new strategy emerged and I have been paper trading it down to a science. I am highly confident that I could make money month after month executing this.

Looking back a few years from now, you will realize this means little. But the borrowed money can take a long time, after you understand this.

90-99% of traders lose money (you and your paper trading plan are no different). But the debt and increasing interest will become a growing monkey on your back.

So do you want to stop now, or learn both of these the hard way?

 

[deadbroke]

Quote from d-rock1080:

I have one great thing going for me and one not so great. The great thing is my trading. A couple months ago I lost more money than expected and it really hurt. In fact, it crippled my ability to trade with real money. However, during the end of that experience I learned more than I ever have over the past few years. A new strategy emerged and I have been paper trading it down to a science. I am highly confident that I could make money month after month executing this. One important aspect of this strategy is the risk management side which I failed to follow through with in the past, and so I lost money. So I have everything in place. The only problem is lack of capital. With my current job, I can save some money but not that much.

Here comes my question: is using any type of credit for funding ever a sound idea? My returns on paper have been fairly consistent, and I would not treat real money any differently. It is ingrained in me. I figured using a credit card to supplement savings could work. I would make money on the borrowed funds, and pay back the original amount every month. I would be paying back basically a set amount, but every month my account would grow in size. Soon enough I would not even need credit to fund my trading. What I am talking about is seed capital for my trading career. A classic capital structure mix of debt and equity. What does anybody think of my views on this?

D

Good effort. Keep thinking and sorting these things out. We're sorting other stuff out too, but observing, thinking, then observing again, that is what will make you formidable. The market will exploit your current obvious weaknesses in a giffy. Patch these up first, then come to the battlefield again and take another look at Mike Tyson in his prime. Then decide if you need to go back and do more work before climbing in the ring with His Mercilessness.


current outpoints

lack of patience and prudence

massively insufficient grubstake

using credit for trading funds = taking mother-in-law on the honeymoon.

 

[Hardo]

If you are talking about taking out a few thousand and trying to make it don't bother. Trading with a few thousand is an even bigger battle to overcome. I tried this for awhile but it is very hard unless you are very lucky. A couple of bad trades and your stake is in serious danger and it is hard to trade around the PDT rule.

I started by taking out 32k in cc loans based over a one year period so i could escape the PDT rule,but once again I do not recommend this as it is very hard to do and involves a lot of risk if you fail.

But then again with the current state of affairs with this nation you might as well do it because if you fail the worst that could happen is that Obama will bail you out and make everyone else pay for your mistakes and poor judgement

 

[Hardo]

I add, what is the worst that could happen:

You will have no money and qualify for every government program that will provide you a better standard of living than you would get if you actually went out and got a real job.

In the end if your don't make it at least you made an effort and tried to make something for yourself. At least you took out this cc debt trying to better yourself and make money rather using it to by big screen TV's and other shit that you knew you would never able to pay back.

I say go for it, Obama will provide for you even if you make nothing and contribute nothing to the country. Welcome to bailout nation slash give me something for doing absolutely nothing nation.

Everyone that works hard and actually pay taxes and works will continue to pay for you to chase pipe dreams with no real consiquences in the end.

 

[Picaso]

Quote from d-rock1080:

What about the notion of matching my personal equity? For instance, I have $1000 and I borrow $1000 (at most) for the month. I make a 20% return on the $2000 and end up with $2400 after one month. I then pay back the $1000, leaving me with $1400 in personal equity. I then repeat the process but this time I borrow $1400 and I begin the month with $2800. This cycle continues until I hit $10K or so in personal equity and then I can proceed to build my capital without having to borrow anymore. My risk would be limited because my account would have to suffer more than a 50% loss for me to not be able to repay the previous credit card balance. This simply would not happen because of the risk management practices that I have in place. Any comments would be appreciated.

Credit and OPM make sense if you're talking about huge sums that otherwise you would never be able to come by. Putting a couple of thousand dollars on a credit card or trading a few thousand dollars of some friends so that you don't have to get a second part-time job and save for a few months are not worth the inherent risks and reflect that you're simply looking for a shortcut. My EUR 0.02.

 

[DeeDeeTwo]

Quote from cooolweb:

how about you take anothr job delivering pizzas and making a steady capital wage.

(1) OP has zero track record making money trading...
No matter how artfully he spins it.

(2) OP should keep working and save $50K or whatever...
Because no one has ever bootstrapped $5K into a trading career...
No matter how much BS you read on the internet.

(3) Once he has $50K, OP should quit is job jobs...
And make a TOTAL commitment to trading.

(4) If you can make money trading over time...
It's OK to max out your credit cards (see #3).

 

[gov]

Quote from d-rock1080:

I have one great thing going for me and one not so great. The great thing is my trading. A couple months ago I lost more money than expected and it really hurt. In fact, it crippled my ability to trade with real money. However, during the end of that experience I learned more than I ever have over the past few years. A new strategy emerged and I have been paper trading it down to a science. I am highly confident that I could make money month after month executing this. One important aspect of this strategy is the risk management side which I failed to follow through with in the past, and so I lost money. So I have everything in place. The only problem is lack of capital. With my current job, I can save some money but not that much.

Here comes my question: is using any type of credit for funding ever a sound idea? My returns on paper have been fairly consistent, and I would not treat real money any differently. It is ingrained in me. I figured using a credit card to supplement savings could work. I would make money on the borrowed funds, and pay back the original amount every month. I would be paying back basically a set amount, but every month my account would grow in size. Soon enough I would not even need credit to fund my trading. What I am talking about is seed capital for my trading career. A classic capital structure mix of debt and equity. What does anybody think of my views on this?

D

Do you realize that you can have a strategy with an edge and even so solely based on the lack of capital still lose? Not sure what market you are applying the strategy against, but in anything I trade a couple thousand dollar stake would put my risk of ruin at better than 50%, even if my edge was better than 0.15. Rather than seek approval on a board why not learn what the likelihood of success would be based on probabalistic models that have a basis in truth?

 

[donnap]

A smart solution would be to take out a loan that you can pay off from your income.

I wouldn't count on trading profits to pay it off - sim trading and the real deal are two different animals. Every little set back would put you in crises and possibly affect your trading.

Cut down expenses. Make min. payments and put the rest in high yield savings so that at the end of the one year loan you can pay it off. Then, your trading acct. is yours.

The days of 0% no fee cc loans are over. But you should be able to get 0% with a 3-5% fee. That's still a pretty expensive loan - you wouldn't want to tack on large interest charges after the promotional rate is over - pay it off.

If you're young, then just having the discipline to accomplish this bodes well for future financial success.

You'll earn peanuts in the savings acct. and probably not do nearly as well as you think trading. I wouldn't worry about it - you may learn how to handle money better - something that surprisingly few people do.

 

[Humpy]

If you are sure you are that good I recommend trying it out with a $500 spreadbet account. With minmum bets it will take a while to lose the lot or ( miracles can happen ) you will have no need to borrow a penny.

GO FOR IT

 

[promagma]

Quote from DeeDeeTwo:

(2) OP should keep working and save $50K or whatever...
Because no one has ever bootstrapped $5K into a trading career...
No matter how much BS you read on the internet.

Hey I did .... 5k at a prop firm