Borrowing to trade

[SimpleTrades]

Assuming you can pay off the balance any time you choose you should take the full $10,000. The cost of capital in the first year is very low ... in fact low enough that you can take it and not use most of it right away. Take the money and increase your size gradually so you aren't in over your head. If your results stay good keep ratcheting up size but if you can't make the size work just pay off the balance and go back to square one.

Low risk proposition for you with a real upside. Go for it!!

Thanks for your input.

There's a real opportunity here for me. The advantage of the credit cards is a new development . After spending years paying off student loans including administrative errors that destroyed my credit rating, I moved from one credit card with a $750 limit to 6 cards with over $36,000 in 13 months.

My business requires me to charge $21,000/month on average to the credit card and the cash flow ( 70% of the transactions are refunded by customers with cash) allows me to make payments every couple of days and clear the credit card debt fully by the end of the month. My point is that I can maintain a very high level of credit card debt without paying interest because of the liquidity in my business.

There is a real opportunity here, if I have the nerve to put myself deeply in debt, to create significant interest free trading capital.

Do I dare exploit this??!

 

[xandman]

Since your swinging so much cash flow, why not? The amount has become trivial.

Thanks for dropping the bomb after several postings. You managed to pull in some senior posters.

 

[SimpleTrades]

Since your swinging so much cash flow, why not? The amount has become trivial.

Thanks for dropping the bomb after several postings.

It's not quite as simple as that. The cash flow is $21,000/month. However, my personal income is only about $4200/month. I know that looks odd. Try not to confuse income with liquidity, if I'm using the right word. $21,000/month is passing through my hands, but I only get to spend $4200 of it on myself.

I charge $21,000 to the credit card. Customers pay it back immediately with cash. I pay off credit card. I'm left with $4200 to spend. Makes sense?

 

[SimpleTrades]

Since your swinging so much cash flow, why not? The amount has become trivial.

Thanks for dropping the bomb after several postings. You managed to pull in some senior posters.

Look, regardless of cash flow, $10,000 of credit card debt against $4200/month of personal income, may be a stupid idea. There is no bomb being dropped here. I still have to ensure I can pay this back if I lose the borrowed money.

 

[loyek590]

Look, regardless of cash flow, $10,000 of credit card debt against $4200/month of personal income, may be a stupid idea. There is no bomb being dropped here. I still have to ensure I can pay this back if I lose the borrowed money.

well now you are singing a different tune. when you started out you said you were confident you would be profitable, now you are talking like it may be possible to lose

in that case, borrowing on a credit card to trade is about the stupidest idea I can think of
the only thing

about the only thing I can think of that would be stupider is taking out a home equity loan to fund your trading account

if the problem is you are under capitalized, just trade smaller, which is easy to do in forex

if you are profitable you will have more than you need soon enough without borrowing a penny

 

[SimpleTrades]

well now you are singing a different tune. when you started out you said you were confident you would be profitable, now you are talking like it may be possible to lose

in that case, borrowing on a credit card to trade is about the stupidest idea I can think of

Good grief! Please, reread my original post. I made no statement about my future profitability. I stated my previous performance, and that I had learned to be consistent with a $2000 trading account.

 

[Swan Noir]

Look, regardless of cash flow, $10,000 of credit card debt against $4200/month of personal income, may be a stupid idea. There is no bomb being dropped here. I still have to ensure I can pay this back if I lose the borrowed money.

If, as I said in my last post, you don't feel the need to trade all that much size just because you took the money you don't have to ensure you can pay the 10G back. Increase size slowly and only as you continue to win and you'll never be that deep in the whole. Don't confuse taking the money at 1% with trading all the money. Two totally different concepts. You need to take the money bya date certain but you never have to trade it.

You trade as you win. if you start to go south pay the damn debt off. I don't see much risk here in taking the loan!!

 

[iflyjetzzz]

I can't believe anyone would think this is a good idea.

 

[Swan Noir]

I can't believe anyone would think this is a good idea.

You're right. It's not a good idea it is a great idea. Taking money at one point and using it only if you continue to be profitable as you SLOWLY increase size is about a good a deal as he'll ever encounter.

Not liking this deal is only for those constrained by cliches such as never do x, y or z on borrowed money. Goldman and Morgan Stanley clearly don't believe that and did not believe it when they were paying five points for overnight money.

 

[loyek590]

You're right. It's not a good idea it is a great idea. Taking money at one point and using it only if you continue to be profitable as you SLOWLY increase size is about a good a deal as he'll ever encounter.

Not liking this deal is only for those constrained by cliches such as never do x, y or z on borrowed money. Goldman and Morgan Stanley clearly don't believe that and did not believe it when they were paying five points for overnight money.

most likely he'll end up with a zero balance in his trading account and a maxed out credit card at 18% which will take years to pay off. Plus, he now has no emergency money which is the only time anybody should borrow on a credit card.