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RE: Borrow To Trade? - Why It´s A Stupid Idea To Borrow Money For Trading!
"Invest what you can afford to lose". Well I can say it's for case-to-case basis. Some might say borrowing money is not a good idea for investments, but rich people do it most of the time. What someone needs is proper risk management. You can borrow money and set a stop-loss on what you can afford to pay when you lose it. It's for making your trades higher on volume somewhat like leverage trading.
Well I don´t see it as a case-to-case basis. You simply shouldn´t invest with any borrowed money whenever you can´t afford to loose it. Rich people might do so but they probably could pay it off easily with another investment though, normal people mostly can´t do that...
Example, Person A can afford to lose $100. He could apply for a loan worth $1000, and put $500 in btc and $100 each in coin A to D. The ratio may vary but for simplicity, let's factor out the fees. Worst case, all coins go down, he sells all when his total losses become $100. He would actually have unwanted losses on the interest of the loan. But if BTC goes down, but his alts go up, he could break even or profit from it. I guess it would be better than investing all $100 into 1 coin and screaming moon. But the key phrase would be "Invest with any borrowed money whenever you can't afford to loose it." Like people blindly pulling out their 401k to buy btc without any plans when things go south.
That could be a possible scenario but take a look on the market just now. It´s down 20% easily in an hour so you could get stopped out right away loosing your 100$ in a minute. It´s just too risky to invest with borrowed money and I guess no one will be able to convince me otherwise.
You're right. But there were coins in the top 100 which could've offset your losses in the top 10 coins. Some were 30-60% up. Spreading is important. I'm not suggesting that everyone should get a loan to invest in this market. My point is, I believe it's possible and doable. But not everyone has the talent to do so, including me. Thanks for giving time replying to my opinion man. I appreciate it.