Borrowing to trade

ExperiencedJoe said:
Funny that Jesse Livermore always repaid his debt as soon as he could. He was in large part consistently profitable. Perhaps he understood more than anyone else about debt when he shot his brains out - the game is over when you are in debt. He understood the nature of the game, while most would regard gambling against the banks as a business, as an investment.
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Experienced Joe and Loyek590, I think you and others are missing what I am proposing. I am not proposing pure debt. The interest free debt is matched by savings outside of the trading account. I am suggesting that you're better to trade an interest free loan than risk your savings. By trading your savings, you leave yourself in a position where debt is your only option if you lose your trading account and an emergency occurs.

Theoretical numbers:

Invested savings of $10,000. Borrow through an interest free loan another $10,000. The debt is matched by the savings. There is no risk here aside from losing your savings if you're forced to cover your debt with the savings. The benefit? The $10,000 savings continues to earn a traditional investment return. The loan is traded and at best the trading income is used to pay off the debt.

This is a superior approach to simply trading your savings.

Anyhow, there is still some risk for me since I'd rather pay a little interest for a few months then give up my savings. So, I still don't want to lose the borrowed money and find myself paying almost 20%.
 
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If the "traditional investment" return of currently maybe 1% a year is that appealing to you then you should put your money on it and then put the money you borrow on it as well. This doubles the goodness.

The fact you see value in such a small return suggests you don't really have confidence in being able to make more from "trading". Because if you could make more, it would be illogical to then choose not to.

In any case, the investment return will be like a rain drop in an ocean when offsetting any potential loss from your "trading".
 
ExperiencedJoe said:
If the "traditional investment" return of currently maybe 1% a year is that appealing to you then you should put your money on it and then put the money you borrow on it as well. This doubles the goodness.

The fact you see value in such a sm9all return suggests you don't really have confidence in being able to make more from "trading". Because if you could make more, it would be illogical to then choose not to.

In any case, the investment return will be like a rain drop in an ocean when offsetting any potential loss from your "trading".
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1%/year? A traditional investment ( a passive account like the so called "couch potato") account earns about 7% per year depending on the risk you're willing to take. And yes, that is appealing. I believe very strongly that it is a mistake to limit yourself to a single approach to earning money through market transactions. Earn some through trading, earn some more through long term investing from capital gains and dividends and earn some more through interest bearing assets. If you put it all into trading, you might get lucky and become a multimillionaire, but more likely you'll be left with nothing or deep in the hole. This is why I'd rather carry the debt for 18 months rather than lose my other investments. The discipline associated with paying off a debt is easier to impose than directly saving. That's why most people are better off buying a house rather than renting. Most people lack the discipline to invest the money that would otherwise be spent maintaining their owned home. By paying off their mortgage ( a debt ), they are left with an asset which more often than not has a real value.
 
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Just an update:

The increased money in the account did modify my psychology. In fact, it completely changed my strategy. I suddenly changed the strategy to a long term position on the USDCAD pair. Two and half months wasted! I came to my senses today and closed out the position with a $200 loss. Now back to the old strategy with what is now a $5800 account.

Credit card debt paid off with income from my job.
 
i just want to add like one remark that i had to learn the hard way. "only invest money you can afford to lose" and borrowing might not be your best choice, but in the end its all up to you really,
 
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