Last time I made a reference to somebody's identity, I got a follow-up PM from admins here. I better be careful
Took out a loan to transition to full-time trading. 24 years old.
- Thread starter wabu27
- Start date
Excellent points on the reality of paper trading, and on borrowing funds for trading. My major frustration is that I lost miserably trading the day session insider snake pit many years ago before finally giving up. Since then, for the past 10 years I've been tracking the Dow nearly every day, trying to discover patterns (likely the way most everyone else does). Finally focused on the overnight market, and found it to be much less risky to enter positions after the day session close and exit before the next day session begins (or before economic data is released, whichever comes first).
Long story short, I too am looking at borrowing to bring my account size high enough to minimize the risk of drawdowns to stay in the game, but interest rates offered by loan sharks like Lending Club are far from reasonable. My credit card account was 7.9% until this week, now of course it has been raised to 8.15%, still among the lowest regular rates around. Unfortunately I now have some knowledge that may increase profit probability, but no funds to trade, and not nearly enough credit left on that card to become 'safely capitalized' to trade one Dow emini contract. Having a trading account size of $25K/1 Dow emini contract traded would be good, ideally $35K. So many lose because they're trading highly-leveraged instruments like the eminis with much smaller accounts. But borrowing money to trade? Suggestions anyone?
Agreed it is a bad idea. But, having some hard-won experience compels finding a way to re-enter this work. Stats of 96% failure by 'small undercapitalized outsiders' doesn't exactly make the case for venturing into the day markets so when or if possible and safe it will be the overnight market for me. Just have no idea yet how that can happen, maybe it never will. But yeah borrowing the funds is bad. Unless you're a well-capitalized hedge fund insider (wealthy investors borrow money routinely for some of their risk-taking). It's a casino - the 'movers' (traders who work at the exchanges and brokerage houses) vs the 'reactors' (the rest of us). Tough odds to beat whether borrowing or not.
No, wealthy individuals do not generally obtain loans which they personally guarantee in order to trade. Pretty much never, actually. A hedge fund borrowing against their assets or a private equity fund doing a leveraged buyout is completely different than a credit card loan.
True hedge fund investors borrowing/leveraging against assets isn't tapping a credit card, they live in a different world. I did learn they do sometimes borrow to invest, just didn't get the stats on how often they do it so thx for the clarification Sig.
Your time would have been much better spent the last decade learning how to program instead of "tracking the Dow nearly every day".
I hadn't intended to return to anything having to do with trading during that time - it was just ongoing curiosity, thinking I might notice patterns worth taking a second look at. Regarding programming, I made my living as a programmer several years before. Also, more recently I did in fact develop some spreadsheet analyses to tease out whatever consistencies I could (day vs overnight action), with some limited success. Nothing earth-shaking, but learned that with a few exceptions (Brexit, the 2016 general election, and the long-overdue correction this past week) the overnight movement is more subdued and consistent, without the manipulations, breakouts, fakeouts and shakeouts coordinated by the institutional program and other large market-moving entities every minute of every trading day. Even your broker reserves the right to trade against its own clients if you read the agreements they make you sign when applying for a account. I could go on, except here I'll just say, 'they don't call them BROKErs for nothing'. 96% failure rate for the small, outsider day traders, most getting the same training, education in technical analysis/indicators, and every new trader being offered that same education. Something wrong there. Just sayin.
Yes trading is hard.
Trading on borrowed money is several fewer arrows less for your quiver.
I hope your system works for you.
But best work with risk capital because there’s little doubt That you will be amongst the 96%