Stock speculation. Stock market - investor and speculator
Wheat producers, wholesalers and consumers may be better able to predict future grain prices (perhaps due to the fact that they do not need much effort to obtain relevant information) than others. However, the latter is not prohibited from taking part in market transactions. Anyone who uses a futures contract to mitigate risk is called a hedger. However, most of the trading using futures contracts is carried out by stock speculators who are engaged in these transactions in accordance with their forecasts about the future level of spot prices.
Stock speculators are not motivated by the desire to reduce the degree of risk inherent in their production or commercial activities. Their interest in operations with futures contracts is due to the possibility of earning income from these transactions. Stock speculators usually collect information that makes it easier to predict the price dynamics of the relevant commodities, and then buy or sell futures contracts based on the predictions made.
One and the same party can act as both a hedger and a stock speculator. Indeed, it can be said that if a farmer, baker, or grain broker does not want to hedge, then they are speculating on prices. Competition among active predictors of prices in the futures markets contributes to the success of those who have a competitive advantage in forecasting wheat prices through specialization in this area.
Imagine, for example, that you are a wheat stock speculator. You collect information on all factors related to supply and demand that determine the price of grain, such as total area under crops, weather conditions, production plans of the main producers in the bakery industry, etc. "As a result, you make a forecast of spot prices for next month... Let's say the forecast price is $ 2 per bushel of grain. If the current futures price for delivery in a month is less than $ 2 per bushel, you buy (go long) the futures contract because you expect to generate income from that transaction.
To verify the above statement, assume that the current wheat futures price to be delivered in a month is $ 1.50 a bushel. When you go long on such a futures contract, you lock in the purchase price for the grain to be delivered in a month at $ 1.50 per bushel. Since you expect the spot price to Deliver $ 2 per bushel at that time, your expected profit is $ 0.50 per bushel.
Now imagine that the prevailing futures price for delivery in a month exceeds $ 2 per bushel, i.e. the spot price you predict. For example, let's say Who will be $ 2.50 per bushel. In this case, to make a profit, you sell the futures contract (open a short position), fixing the sell price at $ 2.50 per bushel. At the same time, it is possible to buy grain at the spot price, which at that time was $ 2 per bushel. Thus, the expected return is $ 0.50 per bushel.
As a stock speculator, you can take any position that gives you the opportunity to make a profit. Of course, it should be borne in mind that since you do not know for sure what the spot price will be in a month, you can lose money in transactions with futures contracts. However, you take this risk with a profit.
Speculative activity in the futures markets is sometimes criticized because it is of no value to society. Indeed, she is often depicted as some kind of analogue of a card game. However, there are at least two important economic functions, the implementation of which is the exchange speculators.
First, commodity brokers who are consistently successful owe this correct prediction of spot prices. Thus, their activities lead to the fact that futures prices are the best predictor of the trend of changes in spot prices. Secondly, stock speculators take on the role of partners in deals for hedgers in cases where there are no other hedgers who are ready to immediately open the corresponding positions. Thus, the activity of stock speculators makes the futures markets more liquid than they would be in the absence of speculative transactions. Indeed, if futures contracts were bought and sold only by hedgers, trading might not be active enough to sustain an organized futures trading exchange. Thus, the presence of stock speculators can be very necessary condition for the very existence of some futures markets.
The term "speculation" comes from the Latin word "speculatio", which means stalking, looking out. In the modern dictionary of foreign words, the term speculation is defined as:
1) Buying and resale of various goods at higher prices with the task of making money.
2) Purchase - sale of exchange values (stocks, bonds, bills, etc.) with the task of obtaining speculative profit from the difference from the difference between the purchase and sale price (rate) when resale of these values.
3) A calculation based on something, intent aimed at using something for personal gain.
In economics, speculation is defined as making a profit by using price differences over time.
Speculators are the largest, but least fortunate group of participants in the futures market. Although there are no official statistics on the successes and failures of speculators in the futures markets, however, some expert assessments have been made. According to these estimates, only 10 to 30% of the total number of speculators had a net profit in each year of their activity. But this does not prevent all new groups of participants in the futures market from trying their hand at speculative operations.
The subject of speculative transactions is trading in a deferred right to make and accept delivery under a contract in order to extract the "price difference" due to changing conditions economic activity... Speculators, unlike hedgers, who seek to protect transactions from risk, take risks in order to obtain a certain profit.
IN market conditions speculation is an integral element of purchase and sale transactions, since regardless of the will and wishes of the parties, one of them, as a result of continuous price changes, ultimately receives additional gains, while the other bears losses.
Exchange speculation is usually carried out by members of the exchange and those who wish (usually individuals) to gamble on the difference in the price dynamics of futures contracts, but large corporations and banks, acting through the same speculators, can also participate in speculation.
In practice, there is no strict distinction between hedging entities and entities whose activities are related to stock speculation, since participants in the market for real goods are also engaged in stock speculation, because in market economy the main thing is to make a profit, regardless of what exchange operations this goal is achieved.
In textbooks on stock exchange business stock speculators the following functions are defined:
§ Increasing market liquidity;
§ Relative smoothing of price fluctuations.
§ Taking part of the risk of investors or hedgers depending on the market;
§ Competition.
In the futures markets, speculators are represented by two main types: short and bull.
A short game is carried out by speculators selling futures contracts in order to buy them back at a lower price. The speculators involved in these operations are called "bears."
The bullish game is carried out by buying futures contracts with the aim of their subsequent sale at a higher price. Speculators of this type are called bulls.
Speculative profits are possible both when playing up and when playing down. At the same time, losses are possible in speculative operations, often very significant. The speculator usually carries out short-term transactions. When he starts an operation, they say: he opens a position, when he closes, he closes a position. If a speculator buys securities, he opens a long position, if he sells, he opens a short position. (6)
Exchange speculations, as a rule, are carefully planned and carried out according to pre-prepared scenarios, through careful preliminary measures stretched over rather long periods. Moreover, the excitement on the stock exchange is not necessarily organized by large stock dealers. This role is usually assigned to small and medium-sized investors, who essentially pave the way for large exchange speculations. But, as a rule, large corporations, banks, primarily investment ones, and other credit and financial institutions already participate in them. An increase in interest in general in certain securities or in shares and bonds of a company may be due to information about a merger with a larger partner, upcoming scientific and technical discoveries in a particular company, false information about business negotiations of companies on various issues ( on the distribution of government orders for large sums). The dissemination of such information can ultimately give a powerful impetus to an increase in the rate, which can seem unpredictable. In this case, it is important to carry out a transaction a few minutes before the end of the exchange, since the established rate becomes decisive for the next day or two. (8)
On the modern stock exchange, not only stocks, but also bonds of private companies and corporations have become the object of stock exchange speculation. They are used for all sorts of shenanigans and frauds that allow you to get speculative profits. For the purpose of speculation in bonds, special companies are created that build their business on fluctuations in the level of interest. In the organization and financing of such shell companies, a huge role is played by commercial banks, which derive additional profit from transactions related to the provision of bonds on credit. Together with banks, other credit and financial institutions that have solid financial resources also participate. In this respect, insurance companies have a special place. When performing transactions with securities, market participants can conduct real, speculative or arbitrage transactions. Stock speculation is as old as the stock exchange itself. Before explaining why speculators are attracted to the stock market, we should briefly dwell on why people speculate. There are two main motives for speculation: profit and pleasure. Every speculator will agree with the first motive, but the second is often more important. Some people love risk, and speculation is by definition risky.
As a result, the question arises: is speculation different from gambling? Those who like speculative operations usually note that in the game risk is created for the sake of risk, while speculation is a mechanism for accepting risk that already exists. For example, no one needs to lose money or gain money depending on which card is drawn. Everyone can just refuse to play. However, someone must lose or acquire money depending on whether the prices of stocks or bonds fall or rise, i.e., whether the issuers of these valuable papers or one of the speculators.
The psychological motives of speculators do not differ significantly from the motives of the players. However, stock speculation does shift risk from those who don't want it to those who want it. In other words, speculation in financial assets directs risk taking in an economically productive direction.
Stock trading has a great appeal for those who are interested in a combination of excitement and the possibility of great quick profits. First, it presents extraordinary profit opportunities. Secondly, exchange trading is not technically difficult. You just need to call your billing officer and within a few minutes your order will be executed. There are thousands of brokerage houses and many brokers ready to assist clients in their trading. Thirdly, stock transactions stimulate intellectual activity, they make it possible to analyze the market and predict its changes. (11) Exchange markets are interesting and informative in themselves. One of the first things that speculators discover is that very few events in the world do not affect stock prices or currencies. Stock speculation makes those who just want to make a profit more knowledgeable about the world in which they live.
Most speculators are attracted by the hope of quick profits, rather than concern for the welfare of the economy, nevertheless, they perform several vital functions in the exchange markets that make it easier to trade stocks and financial instruments.
The presence of a large group of speculators on the exchange markets benefits both the exchange and the economy as a whole. The main functions that stock speculators have assumed are: increasing market liquidity, relative smoothing of price fluctuations.
Increased market liquidity. Speculators are an important source of market liquidity. The constant influx of orders from stock speculators into the trading floor can significantly reduce the time for the appearance of counter orders to buy and sell. In a liquid market with a large number of buyers and sellers, transactions can be carried out at any scale with little price change. At the same time, the arrival of speculators, increasing the number of participants in transactions, promotes competition and, as a result, a more effective identification of the objective course. Relative smoothing of price fluctuations. The activity of exchange speculators contributes to the relative stability of the market and generally eliminates price fluctuations, since the operations of speculators are often directed against the market, that is, against the current price trend. By purchasing assets at low prices, speculators help to increase demand, which leads to an increase in prices. The sale by speculators of assets at high prices lowers demand and therefore prices.
Regulation of the exchange market or exchange activity is the ordering of the work of its participants and operations between them on the part of organizations authorized by the company for these actions. The exchange can have both external and internal regulation. Internal regulation is the subordination of its activities to its own regulatory documents: The Charter, Rules and other internal regulations governing the activities of this exchange as a whole, its divisions and employees. External regulation is the subordination of the activities of the exchange regulations state, other organizations, international agreements.
Regulation of exchange activities is carried out by bodies or organizations authorized to perform regulatory functions. From these positions are distinguished:
State regulation of exchange activities, which is carried out by state bodies, whose competence includes the implementation of certain regulatory functions;
Regulation by professional participants in the securities market, or self-regulation of the market. Two options are possible here. On the one hand, the state can delegate part of its market regulation functions to authorized or selected organizations of professional participants in the exchange market. On the other hand, the latter can themselves agree that the organization created by them receives from themselves some regulatory rights in relation to all founders or participants of a given exchange or all exchanges;
Public regulation or regulation through public opinion; Ultimately, it is the reaction of broad strata of society as a whole to some actions on the exchange market that is the primary reason why certain regulatory actions of the state or market professionals begin.
The regulation of the exchange market has the following objectives:
Maintaining order in the exchange market, creating normal conditions for the work of all market participants;
Protection of market participants from dishonesty and fraud of individuals or organizations, from criminal organizations and criminals in general;
Providing a free and open exchange pricing process based on the concentration of supply and demand;
Creating an efficient market that always has incentives to entrepreneurial activity and every risk is adequately rewarded;
Creation of new exchange markets, support for exchange structures, initiatives and innovations, etc .; influence on the exchange market in order to achieve some public goals (for example, lowering exchange prices).
The regulation process in the exchange market includes:
Creature regulatory framework its functioning, i.e. development of laws, regulations, instructions, rules, methodological regulations and other normative acts that put the functioning of the market on a generally recognized and respected basis;
Selection of professional participants in the exchange market; the modern exchange market is impossible without professional intermediaries who must meet certain knowledge, experience and capital requirements established by authorized regulatory organizations or bodies;
Control over the observance by all market participants of the norms and rules of the market functioning; this control is carried out by the relevant control authorities;
The system of sanctions for deviations from the rules and regulations established on the exchange; such sanctions can be: oral and written warnings, fines, criminal penalties, their exclusion from the exchange members.
The principles of regulation of the exchange market reflect the time-tested world practice of the exchange market.
The main of these principles are:
Separation of approaches to regulation in relation to OTC market participants, on the one hand, and to professional participants exchange market - on the other.
The maximum possible disclosure of information about everything that is done on the exchange market. Thus, not only is the opportunity for market participants to obtain the information necessary for making business decisions is achieved, but the degree of trust in the exchange and its members increases;
Ensuring competition as a mechanism to objectively improve the quality of services and reduce their cost;
Avoiding the combination of rule-making and enforcement in one governing or regulatory body;
Ensuring publicity of rule-making, public discussion of market problems;
The principles of continuity of world experience Russian system regulation of the exchange market;
Optimal distribution of functions of regulation of exchange activities between state and non-state governing bodies.
System state regulation the exchange market includes:
State and other regulations;
State regulatory and control authorities.
Forms government controlled market, which include:
direct, or administrative, management;
indirect, or economic, management.
Direct, or administrative, management is carried out by:
The adoption by the state of the relevant legislation
Registration of market participants;
Licensing of professional activities in the exchange market;
Ensuring transparency and equal awareness of all market participants;
Maintaining law and order in the market.
Indirect, or economic, management of the exchange market is carried out by the state through the economic levers and capital at its disposal:
Taxation system (tax rates, benefits and exemptions from them);
Monetary policy (interest rates, minimum size wages and etc.);
State capital ( the state budget, extrabudgetary funds financial resources and etc.);
State property and resources ( state enterprises, Natural resources and land).
The main government bodies direct regulation of exchange activities:
Federal Commission on Securities and Stock Market;
Federal Commission on Commodity Exchanges;
Ministry of Finance of the Russian Federation;
central bank Russian Federation.
The Federal Securities and Stock Market Commission directly regulates activities stock exchanges... The Federal Commodity Exchanges Commission exercises regulatory functions in relation to commodity exchanges and futures trading. The central bank regulates the activities of currency exchanges.
Ministry of Finance sets rules accounting, issues government securities and regulates their circulation on stock exchanges.
Instead of playing roulette, let us consider an exchange game, the attitude to which is twofold: some identify the game on stock market with gambling in casinos where players dominate in pursuit of luck; others call the stock market an efficient market because it is sensitive to changes in price information, reacts instantly to their modifications, promotes rational redistribution of financial resources, while solving many problems associated with uncertainty "
Let us consider the mechanism for limiting risk in ways typical of exchange markets. Uncertainty, as a property of the market economy, gives rise to speculation and arbitration.
Speculation- variety economic activity, based on the use of the price difference over time and assuming the purchase of a product with the aim of reselling it over time at a higher price.
Arbitration- a kind of economic activity, the purpose of which is to make a profit by purchasing (buying) a product in one market and reselling it in another at a higher price. This activity is based on the use of price differences in space.
These two varieties are united by one concept - speculation, which involves a conscious risk for those who engage in it (Figure 14.7).
If a speculator buys and stores a commodity in order to sell it over time at a higher price, then naturally he expects the price of this commodity to rise. If his expectations are met, he will receive speculative income.
Futures is an agreement in connection with the purchase or sale of goods or securities in the future at a price inherent in a particular moment (today).
The mechanism for drafting a futures agreement can be illustrated as follows. For example, financial investor wants to acquire shares in Scania, expecting an increase in prices for the company in the future. He signs a purchase contract with a stock broker
- 10,000 shares in a year at today's price, expecting the share price to remain unchanged. Let's say that a company's share is worth UAH 50, therefore, the contract value is UAH 500,000. If the price of one share in a year rises to UAH 60 per share, then the investor will receive:
- 10 UAH 10 thousand pcs. = 100 thousand UAH of profit.
If the price will fall up to UAH 40, then he will incur losses in the amount of UAH 100 thousand.
Option is an agreement whereby another party can buy or sell goods or securities for a specified period at an agreed price, which may be significantly lower or higher than the current price. An agreement to purchase (buy) is called a call option, and a sell agreement is called a put.
A feature of this agreement is that the investor may or may not realize his right to buy (sell), depending on the market situation. For example, if an investor wants to purchase shares of Scania, expecting an increase in their prices in the future and based on the current price of UAH 50 per share, then by signing an option contract for a period of 1 year for the purchase of 10,000 shares, in the event of an actual increase in the share price from 50 to 60 UAH per piece, he exercises his right to purchase them at a price of UAH 50 per piece, and then to sell them at a price of UAH 60 per piece, and, ultimately, he realizes the right to receive a profit in the amount of 100 thousand rubles. UAH minus the broker's commission.
If the share price decreases to 45 or 40 UAH per share, this agreement provides the investor's right to refuse to buy 10,000 shares. His losses (losses) will be determined only by the size of the broker's commission.
The objects of purchase and sale in the markets of options and futures can be not only securities, but also grain, cotton, sugar, etc. n. These markets are traded by speculators and hedgers. The division of participants in the futures markets into speculators and hedgers is carried out on the basis of their goals.
Speculators- market participants who buy (sell) in order to respectively sell (buy) the same product in the future, making a profit if their expectations regarding the direction of price or exchange rate changes turn out to be justified. They deliberately take risks and hold an open position, having only assets (goods) or only liabilities (securities) in their hands and expecting that at the end of the contract the situation will be in their favor.
Consequently, speculators buy sugar, cotton, or other commodities not because they need them, but because they hope to generate income through risk taking. They agree to sell sugar, which they do not have, or buy it, although they do not need it at all, carrying out these operations not with real goods, but with contracts. In this regard, the futures exchange is called the price market, in contrast to the markets for real goods.
If a speculator in September expects sugar prices to rise in April compared to the current futures price, he will buy sugar (contract) in September, having agreed on its delivery in April. If he expects the price in April to be lower than the current futures price, he will sell the contract obliging him to deliver sugar in April.
Hedger - entity(firm, bank, farmer, etc.), which, unlike a speculator, insures (hedges) possible losses due to changes in prices and exchange rates. He seeks to neutralize risk, holds a closed position, having in his hands balancing future assets and future liabilities.
The hedger is subject to a more favorable tax regime than the speculator. Bona fide hedgers are not affected by the limit in relation to the number of signed exchange agreements. Hedgers are subject to preferential coverage of futures contracts with guaranteed deposits and a margin that is less than for speculators by 25-30%.
Hedging- actions of a buyer or seller aimed at protecting their income from the impact of price changes in the future. This is an insurance mechanism with the help of a stock exchange.
Hedging- a kind of self-insurance that significantly reduces risk and contributes to the achievement of stability in the market economy. The hedging mechanism assumes that the buyer's losses are covered by the seller, and the seller's losses, respectively, by the buyer. This mechanism allows you to avoid loss of profit from changes in exchange rates, price fluctuations, etc.
Hedging- this is the ownership of a certain commodity (long position) and at the same time selling a contract (short position) in the futures or options market or buying a futures before buying a certain commodity on the market. When entering the futures market, the seller is short and the buyer is long.
Both the buyer and the seller have the opportunity to liquidate their position at any time. To do this, each of them needs to perform an action opposite to the original position. That is, the one who held a short position (the seller) buys the futures, and the one who has a long position (the buyer) sells the futures. Thus, the insurance coverage of market participants is carried out.
For example, suppose a rubber manufacturer supplies (sells) it to a tire plant in the amount of 100 thousand tons per year at a price of UAH 500 per 1 ton. But the manufacturer (hedger) expects the price of the fillers needed to make rubber, which he buys from another manufacturer, to increase. To insure himself against the increase in prices for fillers, he signs an agreement with their manufacturer for a known period to purchase the required amount of fillers after a period specified in the agreement (after a year) at a price today... This means that the rubber manufacturer is hedging (self-insuring). If the chain of fillers increases, the rubber manufacturer will receive a certain amount under the agreement to cover his increased costs of rubber production.
If the price of fillers decreases, then the rubber manufacturer who signed this agreement will incur losses, which will be covered by a larger profit from the sale of rubber. The rubber manufacturer will not lose anything either in the first or in the second case, although he will not gain anything. He does not speculate. Its purpose is insurance.
As an example shows, hedging helps to reduce the risk of unfavorable price changes, but at the same time does not provide an opportunity to take advantage of favorable price changes.
To understand the role of speculators and hedgers, it is necessary to know how the expectations of both affect the level of prices in the exchange markets. We have made sure that in the expectation of an increase in the current futures (option) price in the future, both speculators and hedgers will buy contracts (agreements) for commodities on the dash for their delivery in the future. If the expectations of many speculators and hedgers coincide, then demand on the futures markets will increase and prices will rise accordingly.
If the expectations of many are aimed at lowering prices in the future, they will accordingly start selling contracts in the futures markets, which will lead to an increase in supply and a decrease in prices. Therefore, the futures price is the market's forecast of future prices.
Is the market forecast always reliable enough?
On the one hand, futures prices deviate significantly from actual prices. On the other hand, futures prices on average correspond to the predicted ones, but at the same time there are also serious variable fluctuations of the average value up and down. This situation does not contradict the theory of efficient markets, according to which it is impossible to make money in the market, relying only on the fact that the actual prices will be systematically higher or lower than futures. In this way, speculators help to inform futures prices in a certain way about the level of actual prices in the future (Figure 14.8).
Speculative activity can be legal or illegal. Illegal speculation destabilizes the economy. Legal speculation, carried out within the legally defined framework, contributes to more or less accurate forecasting of prices in the futures markets, provides market participants with reliable information, contributes to the preservation scarce resources and their rational redistribution, performs a stabilizing function.
Ilya Roshchupkin, director of the BCS Premier branch in Chelyabinsk, told us what a speculative strategy on the stock market is, what are its main advantages and disadvantages, and also described the main "commandments" of a speculative approach to working on the stock market.
As a rule, stock market speculators are called traders who make money on stock price movements in the short term. Those who buy securities for a long time are considered to be investors. In fact, speculative problems are solved by everyone who aims to obtain a positive financial result due to changes in market quotations, regardless of what time frame they are guided by. Accordingly, trading strategies can be classified as long-term, medium-term, short-term, intraday and scalping.
At the same time, any trading strategy should provide clear answers to the following questions:
When to open a position (where is the entry point)?
Where to fix profit (take-profit)?
Under what conditions should you close a position with a loss (stop loss)?
What amount of capital will be used?
Will the position be maintained (change of profit and loss benchmarks, depending on the dynamics of the market situation)?
In other words, speculative strategy- This is a clear trading algorithm that determines the sequence of the trader's actions to open and close positions.
Short-term strategies are usually based on methods technical analysis, scalping, most often, use as the main reference points the change in the momentary situation on the world markets, as well as the interpretation of the supply-demand ratio, and the medium and long-term are usually based on fundamental forecasts.
Undoubtedly, the algorithmic approach to speculative transactions requires a certain level of preparation from the market participant, some investment of time and (this is perhaps the most important) emotional stability. But also financial results such a trade is paying off. Unlike those who trade on intuition or on the news, system trading provides risk control, eliminates significant capital drawdowns and, ultimately, gives high profitability regardless of the direction of price trends. It is the ability to make money not only on growth, but also on a fall that favorably distinguishes short-term speculative trading from the widespread “buy and hold” approach of long-term investors.
The most effective application of these strategies in conditions of a pronounced trend (it does not matter: growing or falling). During the development of sideways price movements, the profitability decreases, but still significantly exceeds the indicators of the main market indicators.
Despite the large variety of speculative strategies, there are several important general rules, which should be guided by this trading style:
1. It is always necessary to follow a strictly outlined trading plan based on the strategy used;
2. If a trading system over a noticeable period of time (more than a month), instead of profit, it began to consistently bring a loss, which means that certain changes have occurred in the market that are not taken into account in the trading algorithm. Consequently, the trading system needs optimization and revision. If the results have not improved after optimization, you need to switch to another strategy.
3. For short-term trading, you can use only financial instruments with a high level of liquidity. Attempts at short-term speculations with "illiquid assets" are a direct path to losses.
4. It is not necessary to engage in independent development of a unique trading algorithm. Brokerage companies offer a wide range of various speculative strategies to choose from, with the possibility of additional advisory support when using them. You can also use ready-made trading robots.
5. A stock market speculator, in any case, must have basic training in the field of stock exchange business. Before starting to make trading operations, it is necessary to undergo training.
BCS Premier
Chelyabinsk, st. Karl Marx, 48
* The name "BCS Premier" is used by Joint Stock Company "BCS - Investment bank»As a trademark (service mark) to identify the services provided by the bank and is not its trade name. Joint-stock company BCS - Investment Bank. "General license of the Central Bank of the Russian Federation No. 101 dated 12/15/2014."
»Most of us have an unpleasant aftertaste. This, apparently, has remained since the 90s, when the so-called resellers were especially active. Talented businessmen bought where it was cheaper and sold where it was more expensive. But who said it was bad? Today, if not all, then very many earn that way. In almost every type of business, there is one continuous speculation. We take cheaper - sell more expensive. This is the difference between buying and selling. So why not apply this scheme in the stock market? It works great and makes a good profit. But more about everything.
How to make money on promotions?
Generally speaking, there are two ways to make money on promotions. First, build a good investment portfolio and receive dividends from profitable stocks. Secondly, to sell your package of securities when their value increases, making money in this way on the difference in rates. If you buy shares in order to receive dividends in the future, you are. If you do it for later resale -. Is it that simple? Whatever it is. There is also another definition. A speculator is one who makes money on short-term transactions, that is, he sells and buys with great frequency. The investor, on the other hand, is recruiting for the future, hoping to sell shares and make money in a year or two.
The psychology of a speculator and an investor
To fully understand the terms, we will give a small analysis of what is happening in the minds of market participants. For example, how does a speculator think? “The quotes of the company“ X ”are growing. Hence, it is necessary to buy the company's shares. We take, hold for several days, get sufficient profit and close the position. " It is very rare when speculators hold shares for up to a year - this is rather an exception. How does an investor work? He does not rush to the first stocks that come across, which rise in value. His task is to make a deep analysis of the situation and collect. Once he has selected an industry and a suitable investment, a purchase is made. In the short term, the investor is not interested in the stock quotes of the selected company. For him, the further fate of the company as a whole is important, the ways of its development, growth, and increase in the volume of services. All this directly affects his further profits.
Stock speculation. Main advantages and disadvantages
The main advantage of stock speculation is that it often generates quick and serious returns. Here you do not need to spend a long time analyzing the market and studying the prospects of a particular company. The speculator acts quickly, almost intuitively. He "licks" only the cream, makes deals with stocks, and goes home. He is not interested in how the company will develop in a year, two or ten years. He has already made his profit and that's enough. We must not forget that speculators are very important for the markets - they add liquidity to them and give a serious impetus for development and survival. A speculator is a risky person who is ready to give up everything he has for profit. On the other hand, speculation on stocks does not have a very good influence on the position of its stability. Frequent buying and selling without any logic introduces an imbalance in the market, which prevents “legitimate” investors from entering it normally. By their actions, speculators are able to independently "push" prices up or down. It should be noted that there is a huge risk of such "work". Now you can make thousands, and in an hour you can lose everything. This is the fate of the speculator.
Who are they?
So what are they - the speculators of our time? They walk next to us, live next to us, and even write articles. These are detraders and scalpers - the real "monsters" of the stock market. These are people who have something to respect. They are purposeful, disciplined, courageous and, moreover, courageous individuals. Aren't there many laudatory odes? - Not at all. As a rule, there are not so many intelligent speculators who are constantly in the "plus". This is truly an achievement on a par with taking any ministerial position in ordinary life. And I'm not kidding - it really is. Any operation of a speculator is a serious risk. Practice shows that the number of positional traders is getting smaller. Why do you think? It's too risky. It is much safer to do hundreds of trades a day. There is a higher probability of staying in the "plus" even a little. Trust me, risk is well rewarded. During the day, stock fluctuations can reach 4-5%. If you manage to "catch" at least a tenth of such changes, you can have more than 100% profit per year (and this is the minimum). Intraday traders do not hesitate to use such a service as. What does it mean? Detraders receive multiple loans almost free of charge. No interest will be charged for this provided that the money is returned at the end of the day. Such an opportunity greatly increases the chances of raising the level of your profit. Can an ordinary investor dream of such a thing ?!
Special role for scalpers
A special "caste" among speculators is this. In fact, they manage to remove the cream from the market dozens, if not hundreds of times a day. Of course, he makes a small profit from one trade (only a few pips), but the sum is excellent profit. The "weapon" of such a trader is not a scalpel, as you might have guessed, but bare hands and a cold mind. The scalping operation takes no more than a few seconds. But this is enough to take your own and go home. Just imagine how much money you can get from hundreds of high-quality "scalps"?
How do they work?
The main task of the scalper is to closely monitor the window, the so-called “order book”, where all orders for buying and selling shares are visible. monitors the level of supply and demand. As soon as the moment is right, he makes a deal. If the scalper did everything correctly, then he went in the intended direction and the profit began to “drip”. Bottom line - a few pipos in your pocket. If the direction was not guessed, then the deal has to be closed without profit or even at a loss. Nobody knows how deep the market can go, and I don't really want to take risks. Traders who are accustomed to intraday trading do not want to take risks. They believe that leaving a bet for a few days is very dangerous. Indeed, there is no guarantee that the market will not change overnight. So you can stay without a deposit at all. The difference between evening and morning quotes can vary by 5-7%. If you do not have time to close on time, then the loss can reach 10%. A real detrader will never take uncontrollable risks.
Basic rules for speculation in stocks
Each scalper has its own system - this is normal. But there are some rules that are common to all participants in the "speculative" market. Let's talk about each of them:
- Firstly, try to make deals only within one day. Open positions overnight are "death" for a deposit. Such a risk is unjustified even for a speculator;
- Secondly, never think for a long time when making a decision - act solely on your experience and intuition. Naturally, we are not talking about opening positions at random. It is assumed that you already know the market well;
- third, discipline should come first. If the plan is drawn up, act exclusively on it and do not step aside. You can analyze and reproach yourself for mistakes later;
- fourthly, while trading, try not to think about money, do not take profits and incomes too much to heart. If not, it just gets in the way;
- fifthly, keep in mind that short-term speculation in stocks with low liquidity is unprofitable;
- At sixth, in stressful situations, do not sit down to trade. If you lost, quarreled with loved ones, or just the day did not go well - postpone the trade. Usually one trader's operation lasts no more than 10-15 minutes. Several dozen such operations can be done in a day. But the number of open positions should not become a goal.
The main thing in this business is the efficiency of trade. It is necessary to "maintain" several shares, and choose the most promising option for buying at a particular moment in time. And here it is very important to complete the deal on all shares in a timely manner.
What are the conclusions?
Think trading is very easy? - You are wrong. Short-term speculators experience incredible stress during the day (primarily psychological), because constant concentration of attention is mandatory. But such people know how to cope with shocks, continuing to trade even after serious losses. Naturally, conclusions are drawn in such a situation, and mistakes are not repeated. Good luck.
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