When I think about investments, the focus that immediately comes to my mind is on the long term. After all, every professional financial planner is well aware of the wonders that compound interest can do in any investor’s portfolio. With patience, proper diversification strategies and constant rebalancing, virtually anyone can achieve extremely high long-term returns.
But what about the short term? What about trading strategies? Where do they stand in this equation? With cryptocurrencies gaining more and more space in the economy and, consequently, excellent liquidity, it is natural for crypto traders to form an increasingly strong community in the financial market.
Thus, according to my knowledge of the market, the trade and its derivations (daytrade and swing trade, for example) they play an important role in the portfolio of professional investors or those who are fond of the financial market.
The truth is that all trading options in the short and very short terms can be interesting if you are really interested in dedicating yourself to the subject and investing your time and money to have in-depth knowledge in understanding the signals that the markets are bringing us.
However, these practices can be quite risky and involve irreversible property losses if not done with due care. Throughout part of my trajectory in the financial market, I myself decided to invest my time studying about trading and understanding what role this practice should play in my heritage and in my time.
Today, I am clear that “trading” is something that has to be taken as seriously as a profession. It takes continuous study, dedication of time and method.
You can’t do financial transactions based on a tip that looks hot on a Telegram list or on Twitter. It is also not possible to want to follow up suggestions for investments in Variable Income from people who do not have the proper certifications (in this case, the CNPI), this is prohibited by the Brazilian Securities Commission (CVM).
Also, it’s important to limit a very specific part of your equity to gain from the trade. As a financial planner and investment specialist, I make it clear that it is not a good idea to trade leveraged or risk a large portion of your wealth.
Use trading to bring an additional percentage of earnings to your portfolio and, if you have a loss in some operations, it will not affect your lifestyle or that of your family at all.
Finally, I think the most important thing when venturing into this world is to know about behavioral finance.
One of the main behavioral biases we face is the overconfidence trap. If you’re on a straight, hitting your trades in sequence, it’s natural to feel invincible and start betting more, risking big chunks of your money, often without the slightest need.
These behaviors that our brain is programmed to have impact our entire financial life (but that’s talk for another column) and, therefore, it is crucial that you know your mind very well and set strict limits when making your own operations in the financial market.
About the author
Annalisa Blando is a financial planner certified by Planejar (CFP) and founder and CEO of ParMais, the first Wealth Management Tech in Brazil. She is also the leader of the Mulheres do Brasil group in Florianópolis.