trading with a loan

Discussion in 'Trading' started by Satan, Oct 2, 2001.

  1. Satan

    Satan

    please forgive me if this idea is impractical. when i first started trading a couple years ago, i wrote a check using my credit card to fund a large portion of my trading account. thankfully, in the end i was able to beat the interest rate and eventually i paid off the initial credit card charge (and made a profit). although i do use margin now, i still want more money to trade with and i don't want to slave away at a job somewhere to get it. is it possible to take out a loan somewhere, tell them i'm buying a house or something, but instead use the money to trade with? with interest rates so low now, i don't think it would be hard to beat the payments. i know this is risky, but risk = reward, and i'm willing to take the chance. i'm just looking for input on this. what would be the most practical way of doing something like this?

    thanks!
     
  2. Fohat

    Fohat

    A better idea than using a loan is to use index futures which can give you 16:1 leverage, which is basically as if you're paying for your purchase with only 7% in cash (the rest 93% is like you've taken a no-interest loan).

    With loans and futures the leverage is a double edge sword.

    Fohat
     
  3. Bob-K.

    Bob-K.

    If you have paid off your inital loan good for you. This means that you have some equity in your account. If I were you I would pick 5 to 10 stocks in your 1k share price range and do compleate DD. watch historical charts (in this market 3mo max), watch intaday charts, for intraday volitility. Watch extended hours trading to catch late news, and early morning markets to catch trends.

    Then pick out 5 stocks just beyond your price range so when you get there it'll be a nobrainer. Until you make that 25k. Plug away one day at a time @ 200$ to 1000$/ trading day and you'll be there quicker than you think.

    Bob
     
  4. Trading is a business, and any business requires capital to operate, none more so than this one. Debt is a normal part of the business world. I think that if you are serious about trading and have a solid expectation of making a profit, it's a smart move, especially because of the low interest rates.

    Many banks will loan you up to half the value of your portfolio if you tell them you invest in "blue chips". My current stake in the market started out almost completely as a bank loan and I'm going to use my increased equity to go for more.

    The stereotypes associated with trading make it difficult to convince people that it's a real business and not gambling, so it might be tough to get a loan on the premise of a 'trading business'.
     
  5. white

    white

    Satan,

    This might not be a perfect solution but it might help. I got a credit card with a 3,100 limit, 12.5% interest and paid all my expense for about three months. Car payments, insurance, gas, beer everything. My real interest on the card is only about 9% due to interest being paid on the cash in my trading account. Hope this helps.

    White