Forex Investment Loans
Since the global financial crisis, banks have become a lot stricter about who they lend money to and have adopted a more cautious approach in order to avoid repeating the same mistakes all over again.
As a result of this, it is almost impossible to get any kind of forex investment loan because no banks or financial institutions are prepared to offer a loan to people who want to trade forex because they know that most forex traders ultimately end up losing money.
So those people who have little capital to start off with will have to use their initiative if they want to borrow money for forex trading. They can either borrow money from friends or family, or get a loan from a bank without declaring their true intentions of the loan.
However my own view is that you would be absolutely crazy to borrow money or get a loan for forex trading. Here are some of the reasons why:
Most Forex Traders Lose Money
The most obvious reason to avoid borrowing money for trading is simply because most currency traders will end up losing money, as mentioned above. This is especially true for inexperienced traders, and even if a trader thinks that they have discovered a winning strategy, it is still a huge risk to start trading a new strategy with borrowed money.
Profitable Strategies May Not Remain Profitable
It is very common for people to get very excited after buying a forex trading robot or discovering a trading strategy that has proven to be very profitable based on back-tested data, but it is worth remembering that even the most profitable of strategies can become unprofitable if market conditions change in the future, which they inevitably will at some point. So you could easily lose some of the money that you have borrowed.
Additional Pressures
Forex trading will always be quite a stressful occupation, even if you are trading in your pyjamas from the comfort of your own bedroom using your own money, because of the frustration and anxiety that can occur when a trade goes against you, and when you start to experience a long losing run.
Therefore when you are trading using someone else’s money, you are simply giving yourself extra pressure to make money, and this could easily have a negative impact on your trading decisions.
Risk of Default
If you are borrowing money to trade forex from your friends or family, you run the risk of damaging your relationship with them if you ultimately end up losing money or delay paying the money back.
Similarly, if you obtain an online forex trading loan or use a bank loan for forex trading, you will seriously damage your credit rating in the future if you default on your loan, which is a very real possibility if you are using it to trade the forex markets.
Closing Comments – Using Leverage to Borrow Money
If you are serious about borrowing money to trade forex, I would suggest that you use leverage as a means to achieve this goal because most forex brokers offer this option, and if you are based in Europe, the new rules that have recently been introduced will protect you from losing more than your initial capital.
This way you can still grow your money quite substantially if you are successful, but won’t run the risk of ruining relationships with friends or family, or defaulting on any loans and ruining your credit rating if you end up losing money.
You just need to make sure that you have a solid trading strategy in place to begin with, are using sensible money management rules with clear stop losses and exit points, and are not risking too much of your capital on any one trade.
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