Ever tried trading other people's money?

Hey guys!

My friend knows nothing about forex trading so she asked me to trade her money and just split profits. I’m not sure if I should accept. I feel like it will affect my risk tolerance and my own trading progress.

Have you ever tried trading other people’s money? Maybe from family, friends, or colleagues?

Any advice would be much appreciated. :slight_smile:

Hey Huck,

Most likely Your trading will change, especially as You are risking money of a close person. But everything depends solely on You and Your mentality, many people go bust because they are scared to lose someone’s money thus they will close with any profit or small loss without letting the trade develop and it might be destructive in the long run. On the other hand it might make You consider Your decisions twice before jumping in the market which can be positive and negative…

I know some Money Managers that don’t know how much their capital is as they use trade copiers from own personal account, helps with them rid of additional pressure.

If You would like Your friend to have same trades, why not use a trade copier or publish Your signal on mql community or elsewhere and she could subscribe. You might be able to generate additional revenue if many people use Your signal, or even become a Money Manager and open a PAMM Account.

My experience trading friend’s money was not that positive, I ended up returning the funds, had a small loss which I covered as well. It was purely psychologically challenging for me knowing that I might lose a good chunk of his savings and it could damage our friendship. Usually I would move SL to break-even even if I knew pullback is coming and then the sprint further in to more profit is inevitable.

I wouldn’t do it…heck I told everyone I know and who asked me to try and trade their money to forget it… I ain’t no one’s bank and I surely don’t wan’t to explain to them concept of drawdown, why I lost that trade, etc. People tend to show their worst at those situations and you may very well lose your friend or get in to an argue with her. If she want’s to invest there are plenty of investment funds that would gladly take her money. Those people don’t understand how hard it is for you to trade… They don’t understand any of it. They just think how cool is it that you are making money without doing anything, and other stupid stuff they invent in their heads…

Doing business with close friends is a fast way to end that friendship.

Facts
Options
Evils

Gather the relevant facts
I fell like my risk tolerance in my own trading
If I lose all her money could have an effect on our friendship T/F
If we have a positive trade, will she expect that everytime
If the account goes down, will she never give me a moments peace.
Add as much information as you can

What are your Options
Do it
Don’t do it
Do it under certain circumstances

Pick the least of the evils from Do it, Don’t do it or maybe under certain circumstances

Remember this quote from the movie Mission Impossible. "Everybody is your friend until the rent comes do"
Hope that helps
Gp

Hello Huck!
Very interesting topic… I opened a second account, trading for my mother, because I was sending her money and I thought I should invest it instead. Your situation is different because it is not your money, so you must be careful… Best thing would be to show your friend your track record (say, on MyFXBook) and if she were still happy to go ahead then you would draft a contract signed by you both as a disclaimer… Trading is risky, so you should protect yourself against repercussion if you were unable to meet your friend’s investment goals…

Thanks a lot for your replies!

x5524662 - Great idea about trade copiers. I think your experience is close to what I’m predicting will happen. I keep on telling others to trade what you can afford to lose. This isn’t the case if I have expectations to meet for my friend.

miliardo - “Doing business with close friends is a fast way to end that friendship.” <-- I AGREE. If we can’t agree to a comfortable deal I’ll probably just recommend her to my investment manager friends.

gp00053 - I might end up taking the “do it under certain circumstances.” But this is the second warning I’ve gotten about business possibly ruining friendships. Something I should also take into account seriously :slight_smile:

PipMeHappy - My friend works in a non-financial field so she probably won’t understand MyFXBook, PAMMs, etc. But a basic contract could probably work. Gah, it gets really complicated when money is involved :))

[QUOTE=Huck;641110]gp00053 - I might end up taking the “do it under certain circumstances.” But this is the second warning I’ve gotten about business possibly ruining friendships. Something I should also take into account seriously :)/QUOTE]

Right the “warning” definitely makes you consider depends. When someone offers me trading advice, especially if they’re looking for money, I always never, no chance not, can’t fathom trying it without first trading in a demo to see what’s what the pluses and minuses. My wife sells real estate, and every once in a while someone’s house she listed givers her a beef, because the property is not sold after a certain period of time. It’s mostly because the price being offered is not what the client wanted it listed for. My wife says the house didn’t sell because I did a extensive market review which I went through with the client and after I suggested what the market thinks, based on past sales bla bla bla, it hasn’t sold because the client wanted 30% more than market value. She says the client doesn’t remember her telling them that. I said in future why don’t you after you present the marketing plan, give them a copy to keep and have them and you sign both. She does that now, and the situation doesn’t crop up nearly as much.

You could open a demo with your friend in her name first and as she’s seeing first hand, and have her sign the standard disclaimer. The reality is, if she’s your friend you probably already know if she can handle forex volatility. If after you explained forex showed her on an account with her name what happens, if it cost you your friend ship, in my opinion she wasn’t the type of friend you should have done business with. I have had friends on both my wife and my side ask about trading their money. Some I told no problem down the road, and some I told absolutely not.
Gp

Im in the same situation, i have a couple of work friends that are going to give me money to trade. just about to open my live account in the next few days. it increases the feeling of pressure a bit. I think volume is great tho and the more money you can get your hands on the better. it is a risk, forex is a risky market thats why i try to be as low risk as possible. Just go for it i would say. Believe in yourself.

Hey… I tried… It was just like demo trading, no fear of losing money… lol… And truly der r more chnces to win when trade emotion free, tens free…

We’re all trying to reach professional trader status for one reason and one reason only: Independence.
We all have the same inner desire to create our own freedom.
We don’t want to have to answer to anyone but ourselves.

I feel that whenever you’re accepting funds from another individual to put to work in any type of market, you are no longer completely independent and free from having to answer to someone. If a friend gives you $10,000 to trade with, you are now responsible for protecting your friends money and answering him/her whenever they have a question based on profit/losses.

Sure, when the money is rolling in, all will be fine and dandy.
But, to the lay-person completely unaware of wins/losses being randomly distributed and the potential to lose 3,4 or 5 trades in a row equaling 5-10% of their money, when the money is rolling out the real fun starts.
You’ll be getting phone calls, emails, text messages asking when the account will go back green- they’ll most likely start to panic and say they want their money back, etc etc.

This will put a strain on you as the individual trader, and potentially lead to over-trading to try and recoup the funds quickly.
Contract or not, it doesn’t matter.
When that balance turns Red, you better be expecting to explain yourself every day or so.
Rarely will you have a partnership which turns out where the investor really “doesn’t bother you”.

It’s just not worth it to me.
Save all the money you can, inject it to the best of your abilities, and focus on small gains month over month.
Eventually, if you don’t over-leverage yourself and keep a cool head, you can build up a nice little account balance.

I did it for a while for a lady from work. I didn’t like it. She was constantly calling me at all hours asking for updates. Plus I felt a lot more pressure which compromised my trading to an extent. I would only do it again as a favor to a family member or friend but still wouldn’t feel very comfortable with it.

But how long have you been trading live ? do you have a profitable system in place to trade someone else’s money ?

I would ask those questions myself first before trading for someone and its very unlikely that I will except for a family member. Like you mentioned I think there’ll be an added pressure if you’re going to trade for other people why not just set up your own trading firm ? Thus the pressure will be less and you can make yourself a regular income just like as if you were working for someone else. But the freedom will be less compared to if you were trading your own money.

All in all though I haven’t tried I don’t think I would trade other people’s money.

Thanks for all your inputs, guys. This is a more common problem than I thought!

I decided to refuse my friend for now. Bottom line is, she doesn’t have enough finance background to understand the limits of risk management on profits. She’ll likely end up checking on me (often) to see how much I’ve made for her and I’m not sure I can give her consistent gains yet.

I’ll stick to trading my own money but I’ll also keep records so I’ll have something to show to potential “investors” in the future.

Huck

I was trading live with fibs pretty successfully at that time. I’ve since gone to a more mechanical type of system. She just gave me control of her scottrade account. I wouldn’t know how to set up a trading firm lol.

I would never do that. Even by common agreement, losing your friends account will create hostility between you and your friend. Do you really want to jeopardise your relationships. IF you really trade good, open PAMM and enjoy anonymous investments…

I see you’ve gotten an idea of the pitfalls so I’ll try not to be redundant, but I have a real-world case-study of the issues, i.e., me. We used a pretty fair algorithm and let’er run. There were surprises at every step even though it had been tested to our satisfaction. Among our pitfalls were:

  1. Used only close friends’ money. I lost a valued friendship and fractured others’. We all basically left town.
  2. We told them to invest “only what they could lose” - which they did lose- all of it. However, some put in their life savings and his daughter’s college money, which I didn’t know - leaving them hurting financially and relationally with those depending on them.
  3. It was one of the most stressful times of my life, and I pretty much lost my fiance because of it. Its one thing to lose your own money but to lose that of friends and loved ones is a horrible, horrible pain I never want to face again.
    I can’t say I won’t ever do it again, because I might. I’ve learned such an enormous amount of valuable, essential life lessons in the process I feel I might approach it from a more sage attitude.
    All the best,
    Jonathan

yeah. we should trade with our money. we will has good status. we will not have pressure. i think this is a factor to success of trader.

As I am not a professional trader not trade for any other person. My focus is my own trading. I trade only my own account never tried for other people’s money , Forex trading is risky I will avoid to use other’s money , It may loss for them.

Nope, I like to trade with my own money as when we trade with other’s money, and we lose, it becomes very hectic.

Yes I tried many times to trade for other people. They trust me in trading . I got most of the time profit for them. I think with other’s account we remain more conscious and careful . Now I do my own trading or for one of my friend account.