A systems analyst at a gas company, B., aged 33, has always been interested in the Market. With a good salary, more than R$ 10,000 a month, he made investments in Treasury Direct, but he really wanted to invest in the stock market. Seduced by comments from friends and advertisements from brokerage firms, he sought information and took courses in day trading, the name was given to very short-term operations for buying and selling stocks on the stock exchange and, in November last year, he debuted as a trader, joining the approximately of 40,000 individuals trying to live off speculation in the market. He withdrew BRL 60,000 from the savings account at the Direct Treasury, deposited the amount as collateral with a brokerage, and started buying and selling mini futures contracts for the dollar and the Bovespa Index.

Loss may exceed the applied amount

Day trading in the futures markets is different from traditional stock investing. While in the purchase of shares, the loss is limited to the amount invested if the company goes bankrupt, in the futures market the losses are unlimited. If the investor bets that the future dollar will rise and it falls, he has to pay the difference to the winner. For this reason, brokerages require deposits of guarantees and establish loss limits that, when reached, lead to the compulsory liquidation of the operation. of prices.

The trader has to win not only against other traders, but also against professional investors, such as treasuries of banks, investment funds, and companies, with their large analysis departments and robots. And there is still the risk of problems in the systems of the brokers that interfere with the settlement of an operation at the right time.    

High earnings and Instagram page

Right off the bat, B. did well and made a lot of money. In a single month, he even made R$ 100,000 in profit from speculation. He was so successful that he began to be sought after by friends and acquaintances who also wanted to learn his techniques for making money on the stock market. He then set up a page on Instagram, in which he showed his main operations and the profits he obtained.

In January of this year, however, B.’s luck changed. In a single month, losses reached BRL 70,000, almost everything he had saved in the Direct Treasury. But he was not discouraged. He began to dedicate himself even more to the market, trying somehow to recover what he had lost. He operated every day, from home or work, which ended up hindering his performance and prompting a warning from his boss. Gradually, day trading ended up becoming an addiction.  

He then began to miss work to dedicate himself to stock exchange operations. But luck didn’t change and he broke the limits at the brokerage where he operated, accumulating a debt. And he changed brokers with each new loss, going through the main ones in the market, such as Clear, Modal, Rico, and Genial. The default control system, warning the market, which would have prevented him from opening an account at one brokerage firm and owing money at another, did not work, and he increased his losses.

Bank credit limit

B. then resorted to the limit of the overdraft account at the bank, a high amount, to finance the operations. When the limit ran out, he told the woman, whom he had married a year and a half ago, that he was going to sell the car to pay off the debts. But he ended up investing the money, plus R$80k, in the market. He lost everything. He then asked his wife for another R$ 16,000 to pay off the debts. The money also disappeared on the day trade.  

Mood swings

An intelligent and extroverted individual, B. stopped leaving the house, he just wanted to trade on the stock market, seeking to recover losses, says the woman, who started to worry and question what was going on. But, at her insistence, he stopped telling her what was going on. Noticing the change in her husband, she insisted and made him see a psychologist, who detected depression and prescribed medication and therapy. B., however, did not want to undergo the treatment. “My problem is money, if the psychologist gives me money, I’ll go”, he said.

Winner picture

Strangely, he kept telling his friends that he was making money in the market and posting successful trades on Instagram. For everyone, he remained a winner. What he didn’t count on is that for every BRL 10,000 he earned, he lost BRL 20,000.

On the 19th of July, a Friday, B. did not go to work. He stayed at home to wait for the mason who was renovating the apartment. At 10:30 am, B.’s wife received a call at work. She was from the police, stating that he had been in an accident and that she should go to the police station. As he was riding a motorcycle, the woman imagined a traffic accident. Upon arrival, the deputy said that B had killed himself. In the apartment, the police found B.’s computer turned on, with the screen open on the stock exchange page. That morning alone, he had lost another R$37,000, says his wife.

A debt of BRL 285 thousand

She then learned that B. accumulated a debt of R$ 285,000 in the bank, referring to loans to cover market losses. In addition, she had debts of R$50,000 at one brokerage firm and R$30,000 at another. Another surprise awaited her: she discovered that B. had opened an account in her name at a brokerage firm. And she, who had never operated, was being charged with a debt of R$ 25,000.

For the woman from B. whose name Portal Pavini decide to preserve, the tragedy has a lot to do with the psychological situation of each person. “But there should be some security system in the brokerages, which sees when people are losing a lot and tries to prevent it”, she says. With B.’s death, she began to be charged by the broker to pay the debt incurred by her husband in her name. And she also fell into depression.

Study shows that 92% lose

Cases like B.’s do not have a single explanation. But they show the risk that people with some emotional vulnerability run when entering a very high-risk market such as day trading futures markets. Competing with robots and large investors, the chances of these small investors, generally new to the market, winning is very low, as shown in a study by Fundação Getulio Vargas (FGV) professors Fernando Chague and Bruno Giovannetti. The study was carried out with the support of the Brazilian Securities and Exchange Commission (CVM).

According to the study, 19,696 people started day trading in the mini index between 2013 and 2015. Of these, 18,138 (92.1%) gave up, some sooner, others later. Of the 1,558 people who persisted for more than 300 trading sessions Market, actually trying to make a living from day trading, 91% had a loss and only 13 people had an average daily profit above R$ 300.00.

According to the professors, the data also show that the day trader’s performance does not improve as he persists in the activity (in fact, it gets worse). “This last piece of evidence is crucial and goes against the idea, generally propagated by brokerage specialists, that day traders would improve with experience and that, therefore, they should persist”, say the professors.

Like Marijuana

“This is like marijuana”, says Professor William Eid Junior, coordinator of the Center for Studies in Finance at FGV. “A global myth has been created that says that marijuana is not harmful, and woe betides anyone who says that it causes schizophrenia, that it is the gateway to other drugs… the lobby is gigantic”, he says. He criticizes the publicity given to this type of activity in the market. “If you do a search for day trading on Google, you will come across countless articles and advertisements for courses saying that this is the path to independence, and a mountain of innocent people believe it”. When a study like Professor Chague’s comes out, says Eid, the tendency is for investors to use the famous “confirmation bias” and not read the news. “I only read what confirms my opinion,” explains Eid.

Prom kiss syndrome

Another behavior by traders is what Eid calls “the prom kiss syndrome”. “When we were young, we only told our friends about the girls who accepted our kiss, but the ones who slapped us, never,” he says. “It’s just like day trading, if someone loses, they don’t count, they only count the days they win”, compares the professor. He says he passed the study on to an acquaintance who likes to day trade on the stock market recently and the result was as expected. “Of course, he didn’t even read it.”

Eid, who was one of the creators of the Center for Behavioral Finance Studies at FGV, cites some behavioral biases that are present in the case of traders.

Overconfidence, Illusion of Control: How the Investor is Misled

The first is overconfidence, in which the investor thinks he can beat the market on his own. There is also the confirmation bias in which we see only what confirms our opinion, disregarding information that contradicts us.

Another bias is the illusion of control, which makes people believe that they can affect future events or dominate them, even if they have no influence over them, as is the case with market prices.

There is also representativeness, in which the investor only takes into account the events that most affected him to analyze the future. Thus, the friend talking about the gain he obtained on the day trade ends up being more representative than the fact that the investor himself lost.

Also present is the self-control bias, in which the investor finds it difficult to control himself and ends up taking risks again to try to win what he lost, and the optimism bias, when the individual considers himself better than the average in certain situations and believes that only good things happen to him.

Eid also recalls that there are a large number of people and companies that benefit from this type of market and that encourage its growth. “I always remember that those who made the most money in the California gold rush were the pickaxes manufacturers”, he jokes. “The explorers themselves spent all the money they earned.”

For the professor, there is a strong psychological appeal in the day trade market. “The investor gets excited, he thinks he will solve his problem of unemployment or lack of money, but he ends up losing and destroying his family life.”

Guidance to avoid

The facts draw attention to situations in which lack of financial control, of any kind, can lead certain people to think about extreme attitudes, without realizing that there are always other ways out. In these cases, friends, family, and people close to you may notice the danger signs and try to help. The Ministry of Health released a suicide prevention script that shows the signs that there is such a risk and gives guidance on how to proceed to help those in difficulty. The site is Block Chain Recovery Center. There is also the work of the Centro de Valorização da Vida (CVV), which provides emotional assistance to those who are in difficulty by calling 188.

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