Many dream of becoming overnight rich by trading in the stock market, forex, or cryptocurrencies. However, when one does not have sufficient capital, many consider starting trading by taking loans or borrowing. Although it may seem profitable to hear, it is essentially a suicidal decision.

Here’s a discussion on why trading with borrowed money should not be done and what the disastrous consequences can be.

1. Psychological pressure and wrong decisions

Trading is inherently a mental game. When you trade with your own savings, losses hurt, but they don't create panic. However, when the money is borrowed, there is double pressure on your mind:

  • Pressure to make profits in trades.

  • Pressure to return money on time.

Due to this extra pressure, you will trade not with Logic but with Emotion. And decisions made under the influence of emotion are generally wrong.

2. Inability to accept losses

An unwritten rule of trading is— "Take only as much risk as you can afford to lose without impacting your lifestyle."
But when trading with borrowed money, you cannot accept losses. When the market goes against you, instead of cutting losses (Stop Loss), you hold onto the trade hoping the market will turn around. But most of the time, that doesn't happen and your entire capital goes to zero.

3. The Debt Compounding Trap

Even if you make a profit in trading, the interest on borrowed money or mental obligation reduces your share of profit. And if there is a loss, the situation can become disastrous:

  • On one hand, capital is lost.

  • On the other hand, the burden of debt weighs down.

  • To repay the debt, new loans have to be taken, which can leave you destitute.

4. Revenge Trading

After losing money, a person feels a strong urge to quickly recover it. This is called 'Revenge Trading'. When borrowed money is lost, this tendency takes a severe form. People lose their judgment and take even bigger risks, ultimately ending up in serious trouble.

✅ So what should you do?

If you really want to be a trader, follow these paths:

  1. Learn first, earn later: Invest time before investing money. Learn technical and fundamental analysis.

  2. Do demo trading: Practice with virtual money or a demo account before using real money to test your skills.

  3. Start with a small capital: Without borrowing, start with a very small amount of your own savings (that you won't have a problem losing).

  4. Increase savings: Create a separate fund for trading, do not bring in money for household or emergency needs here.