borrow money to trade

I actually don't see borrowing money from friends and family for trading as much different than borrowing money for any other purpose. The question is, when you say "borrow" do you actually mean "borrow"? Are they investing in your business (you succeed and they own a portion, but if you fail, they lose) or are you actually borrowing (you'll pay back no matter what, with interest)?

If you're treating it as an investment (you won't pay them back if you lose it all and they get a percentage of the profits), then I don't see this as much different from getting investments from friends and family to start a business. People get initial investments from friends and family as part of early stage of startups all the time -- in fact it's often expected to have happened before investment groups will invest. If you couldn't convince friends and family to believe in you and your idea, why would an investment group want to invest?

What is important is that you set expectations in a similar way that you would if you were pitching them a business idea -- which means you need to have well researched the business you want to start (prove your track record via paper or other methods), properly planned what it will take (in terms of resources, time), risks, and so forth. Provided you actually treat it like a true business investment, not "ZOMG I CNA MAKES U 5000% EACH YEAR GUARANTEESED!$!@$@!$!@" then I think it could be OK, but the important thing is that they have a true understanding of risks, expectations, and they treat your investment proposal with the same due diligence they would if it were any other business investment.

Bear in mind however, that you probably shouldn't take $ from a family or friend to start a business if that friend or family would experience a financial hardship if they didn't get it back. You should treat a trading business in a similar fashion.

Edited: bolded a sentence for emphasis
 
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I got around 200k from a good friend of mine to trade with and pay him 7% yearly net. He has some cash so it didn't make a difference for him and its been good so far and few other friends have put 20-30k in.
 
NanoTick said:
Has anyone borrowed money from friends and family to trade? What does it take to convince them of your ability to make money for them?
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Yes. The family member had a choice of earning pathetic interest from a bank or trying their "luck" with me. You need a plan that has at least historically worked. You only do this after many years of figuring things out and feeling that you at minimum can not lose money in the medium term. Thinking you'd borrow money to start trading a vague strategy is a horrible idea.

If you're not from a top university living in a country with low salaries and are young, you don't have any other options. In say Norway or many parts of US, you might work a few years and you'd have plenty to trade with, in other places you'd work for 8-10 years, save every penny and still not have enough for non-PDT trading.

Worked out well in my case.

NOTE: I was actually managing the money and sharing profits, not borrowing.
 
For a topic which should garner a host of good and thoughtful replies, this one seems to have attracted unthinking, knee-jerk posts like flies.

I'll bet it was timing, and most of you had not yet had your coffee.

That's okay.
 
If anyone asked me for $ to borrow for trading or gambling I will write them off and give them a verbal whipping. The type of person that asks to borrow from friends or family is the least likely person to ever pay it back. If you want to trade be a real man and go earn it. Traders that make it are self made, not helpless lazy punks that ask for handouts from family or friends.
 
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NanoTick said:
Has anyone borrowed money from friends and family to trade? What does it take to convince them of your ability to make money for them?
More...

Do you have a job? Can you save money enough to come up with 25K at least or 10K

It takes about 10 years of heavy experience before you become pretty comfortable trading and becoming consistently profitable. Its no different than becoming a 747 pilot. Lots of learning and lots of cockpit hours before you are considered ready to to be responsible for all the lives in a large 747-400 crossing the Atlantic.

I say Save money for a couple of years and watch the markets, make notes on what causes markets to move and learn to get a pulse on the market.
 
comagnum said:
If anyone asked me for $ to borrow for trading or gambling I will write them off and give them a verbal whipping. The type of person that asks to borrow from friends or family is the least likely person to ever pay it back. If you want to trade be a real man and go earn it. Traders that make it are self made, not helpless lazy punks that ask for handouts from family or friends.
More...

If the alternative for your family member is a CD then it's worthwhile to at least think about from a business perspective. It's far from a handout when profit, even potential profit is involved.

Not everyone is willing to screw over a close family member, it comes down to trust. I see you come from a different background. I had several family members offer funds at one point.
 
I do not believe that NanoTick is looking to screw over friends and family.
May be he needs to really explain well to his friends and family the risks that are inherent to trading : after all, if friends and family are willing to lend, why not IF they are fully aware of the risks. The thing is most who borrow will not talk about the risks when borrowing.
 
Let's be a bit careful here. If you actually borrowed money you might demonstrate a negative net worth. Disclose that on your new account form you'd be unable to open a brokerage account. You can't open a brokerage account or meet a margin call with a credit card for similar regulations. Most people who are trading with borrowed money won't disclose it - this simply magnifies the problem if something goes bad. Often your lenders tend to end up bringing an action against your brokerage firm as they are the only "remaining" deep pocket. They roll out your new account form and again your problem is magnified. Friends and family accounts can be a superior alternative, but make certain absolutely full disclosure to all parties involved.

Everything goes well and usually no one ends up caring. You would be amazed at how much of what ends up in litigation and arbitration is between related parties.
 
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