You might be right if you think this is a dangerous way of forex and crypto trading.
Most people who try using the money of others blow their account, lose all their money plus some, and end up being more broke than when they started. (Plus, in debt with friends or family…)
But if you know what you do, trading with OPM (Other People’s Money) can be very lucrative.
Disclaimer: This blog gives no financial advice; I share my personal experience with trading.
When I started trading 10 years ago, I used my own money as seed capital and invested no more than I could afford to lose.
“Don’t trade with more money than you can afford to lose” was the mantra of my initial three-day trading and investing course.
(I took my first trading course at Investment Mastery, to learn the basics. It was worth every euro I paid for it)
During my first years of trading Crypto and Forex, I managed to grow my portfolio through strict risk management and the power of compounding.
Risk Management is the most important skill when trading.
In the various trading groups that I am a member of, people blow their accounts literally every day, not only the new and inexperienced ones.
I feel sorry for the newbies who make a crucial mistake on day 1 or 2 of their trading career. (There is a reason everyone advises you to start with a demo account until you know what you’re doing… but if they somehow missed that warning out of enthusiasm, it is a bitter pill to swallow, to lose your first 500 or 1000 euro or dollar in the time of an eyeblink…)
However, another group than the newbies loses their start capital.
Greed and FOMO (fear of missing out) are both powerful emotions. After closing a few good trades with great profit, some people think that they’re the Warren Buffet of Crypto or the successful head trader of Investment Mastery!
Because greed gets the best of all of us sometimes, I trade with stringent RISK MANAGEMENT RULES for myself.
- I never risk more than 1% of my portfolio in a trade. This means, that if my portfolio is 1000 euro, my loss is never bigger than 10 euro. if a trade is extra risky, I risk only 0,5%
- My Risk-Reward Ratio is at least 1:2, preferably 1:3. This means that 1 winning trade gives me a profit of 3% of my portfolio value. So if I lose 4 trades (4x 1% = 4%) and win 2 trades (2x 3% = 6%), I still win.
- I trade with a Stop Loss – this means that if the trade goes the wrong way, it’s automatically closed, so I won’t lose more than my 1%
- 2 Stop Losses in a Day? No more trading is allowed for that day!
How do I use money other than my own when trading?
Certainly not by putting my trade capital on my credit card when I start a new account! It’s a bad idea, if you ask me. Interest on credit cards is sky-high, so this puts pressure on yourself from day one. Not good.
Borrowing money from friends or family to start your trading adventure is even worse.
If things go wrong or you succumb to greed and failing risk management, you lose much more than money.
There are better ways to trade with more money than you or your family have in your savings account.
I grew my account with this strategy:
Leverage Trading combined with proper Risk Management
What is Leverage Trading?
Leverage is the use of borrowed funds to increase one’s trading position beyond what would be available from their cash balance alone. Brokerage accounts allow the use of leverage through margin trading, where the broker provides the borrowed funds
With this borrowed money from the broker, I can make bigger profits, but also bigger losses!!
That’s why I traded only with my own money for the first 5 years. Even now, I use a low leverage of 10x or less, which means that if I trade with 20 dollars of my own, the broker adds funds x10 – the trade is worth 200 dollars with this leverage.
I am not giving any financial advice here. But if I did, it would be to learn how to trade first and start out with Low Leverage!
Using Leverage and my Trading Rules, I grew my portfolio substantially.
For Crypto Leverage trading, I use two exchanges: Bitget and Bybit.
For Forex trading on my personal account, I use Vantage.
I am part of trading groups on Telegram and Discord. Some are paid, but excellent information is also available for free online.
I will write a blog post with links to my tools and resources one of these days.
Do you use Leverage while Trading?
I would love to hear from you!
Thank you so much for this awesome post! I’m just beginning my trading venture, and I really need all the information I can get. Trading with opm seams like a really interesting step to take when I feel more confident in the future! One can tell that you have massive experience in the field , which I’m so grateful for. So happy I found your post !
You almost make me blush Jonah, having massive experience is a huge compliment! I feel that I still have much to learn in trading though, that’s why I recently joined a new mentorship. I keep on studying, backtesting, and learning…
I plan to write more in-depth about trading strategies, recourses, and communities in the future, I hope to bring valuable info.
For now, good luck with your trading adventure! Let me know how it goes 😉
I have been in the stock market and lost over $1000. If I learnt from you about using the free method first I probably would’ve been less likely to lose those. Also just using small amounts sounds like a really good idea then just throwing heaps in. Thank you very much.
Oh bummer, it always hurts to lose a substantial amount of money 🙁
When I started with Crypto, I lost several thousand dollars because I didn’t know how to check which ‘opportunity’ was legit and which was a scam.
Later I learned how to trade, plus followed strict risk management rules…
I personally don’t trade individual stocks, because you need a large portfolio to manage your risk. Instead of trading individual stocks, I invest monthly in index funds so I don’t loose sleep about my investments.
I really hope you will find the trading style that fits you, and start making a profit!
Goede blog en goede informatie. Die waarschuwing om eerst iets te leren voordat je veel geld riskeert is top!
Dankjewel lieverd!
Ik weet uit ervaring hoe belangrijk het is om eerst goed te studeren en pas daarna…