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Should I take a loan to trade in the Forex market?


In recent years, our country has been steadily gaining momentum in terms of weighting itself with loans. “Prem” is so good that soon we’ll catch up with America. Now any average family has one or more loans. And cunning lenders, offering to purchase a product on credit, have expanded their services so much that the borrower has the opportunity to realize almost any of his ideas in no time, if only the borrower satisfied the conditions of the lender.

How to get a lot of credits when trading in Gamestop

Oh, this alluring world of finance in the face of the Forex market. Each of us, more than once listening to the news of the world of finance, more than once in our fantasies tried on the role of a trader. And what is surprising is that a person decided to be closer to this world. Of all the available places, the closest is the Forex currency market. But the interesting thing is that everyone begins to trade in their own way. Someone made some money on the Internet and decided to invest it in the market.

Others opened a trading account with a broker, and saved a small part of their money directly on deposit from their salary. After a tidy sum accumulated on the deposit, they began to trade. Still others went to acquaintances to borrow money. If you didn’t succeed in borrowing money from friends, they turned to the bank in order to obtain a loan. Having received the expected loan, they immediately transferred it to a deposit, and forward to the cherished dream. We will consider the third option today.

It was not without reason that I decided to start with the fact that there are a lot of ways to start trading. But the third option is often discussed on the forums. There is still no consensus. After all, borrowing for trading on the Forex market is extremely risky. But on the other hand, any business starts with initial capital. The vast majority of companies, at the stage of their development, actively worked on money taken on credit. So what? Most of them paid off the loan, and continue to work. A small amount went bankrupt, but there is an explanation for this. Any business is based on system work. Any deviation from the system leads to losses.

Let's start with the positive side of trading for a loan taken from a bank. Firstly, the trader has the opportunity to start trading with a serious amount of money on deposit. In this case, an increased lot will allow you to get a larger percentage of profits than trading with a minimum lot and a minimum percentage. As a result, in a short period of time it will be possible to pay off the loan, and a free amount of money will remain on the deposit. It will be pure money, the profit from which the trader will put in his pocket. Secondly, after making some calculations regarding the monthly interest on the loan, you can find out what monthly percentage of the trade should be achieved. For example, we take a loan from a bank at 25% per annum. The loan is 100,000 rubles. So, in a year we will have to give the bank 125,000 rubles. Divide by 12 months, and get a monthly loan repayment. About 10 500 rubles a month. This means that a trader should earn about 11,000 rubles per month, even a little more. In a year, he will return the loan to the bank, and will remain with an amount of more than 7,000 rubles. This is the money of the trader. And he will take profit from this money.

Now consider the negative aspects of trading on a loan. Firstly, it is an extremely high risk. Indeed, in the market you can lose money, and you need to pay off the loan. After all, we will not begin to deny that trade has not gone in the right direction. For example, the same amount and the same percentage on the loan. Now let's calculate. We must return 125,000 rubles to the bank. A loan of 100,000 rubles is entered into the system for a deposit. We start trading on overvalued lots, hoping to get profit faster. As a result of trading, several positions leave us without a deposit. Final result: we owe the bank, and at Forex we were left without money. It means either to take a new loan, or to remain without a basic salary for a long time. But to take a new loan, the idea is rather absurd. And who will guarantee that this loan will not go after the first. In addition, until the first loan is repaid, the second will not work so easily. Unless, with the help of guarantors. The idea is also far from reality. The next negative point: the bank will never give a loan if the purpose of obtaining it is to trade on the Forex market. Bank employees are well aware of the Forex market, and the risks that exist on it. You should not even stutter about the market in an interview with a bank employee. Then you definitely can’t get a loan.

Well, in conclusion, it is necessary to note the fact that a loan for trading can be taken only when a trader works on a trading system that brings stable profits. Do not take a loan if the trading system is at the testing stage. You can lose twice.

The ephemeral benefits of a trading loan

Many banking institutions provide their customers with special loans for working on the currency exchange, in addition, the trader can get a regular consumer loan. In advertising brochures, an investor can find the following advantages of borrowed funds for trading:

  • the ability to immediately carry out large trading operations,
  • rapid capital growth after several successful transactions,
  • a chance to develop an individual trading strategy and consistently earn impressive amounts.

Such a bright prospect attracts novice traders, because a loan to start your own business is a commonplace. However, borrowed money to work on Forex is not the best option for a successful start of a trading career.

Excessively high risks

The first rule of Forex trading says that an investor should not conclude transactions on funds that he cannot afford to lose. In the case of a loan, a trader trades not only with funds that cannot be lost, but also with other people's money. If in the case of the usual loss-making transaction, the trader loses his own capital, then in the situation with borrowed funds he will be forced to return this amount to the bank. It is logical that credit money trading doubles the size of losses.

The influence of emotions

The second rule of trading says that it is important to trade with a cold head, without excitement and emotions. The fact of the loan will constantly put pressure on the exchange player, he will trade on emotions, and fear and greed will push him to erroneous actions. Emotional trading will only accelerate the process of "discharge" of the deposit.

Foreign currency loans

If the exchange player takes credit directly in the currency with which he plans to carry out trading operations, then there is a chance that the total amount of payments will change depending on the exchange rate. Most often, currency quotes change not in favor of borrowers, so a trader overpays not only a percentage of the loan amount, but also the exchange rate difference.

What is the result?

Despite some advantages of a loan for trading, serious shortcomings completely offset the use of borrowed funds for working on Forex. It is better for a novice trader to collect a minimum deposit independently and trade in small volumes. A Forex loan is associated with extremely high risks that only experienced investors can afford with a real working strategy, as well as an extensive body of knowledge and skills.