Speculation in Shares and Forex Market

Speculation in Shares and Forex Market

Submitted by adil on Mon, 03/04/2013 - 06:03

What is Forex Speculation?

Speculation is a very common term in the money markets. This is a term that comes with varying definitions depending where one does his trading. The many dimensions of the term are linked in one way or another. In share and Forex trading the term is loosely used to refer to an undertaking in which an investor takes a bigger risk in the hope that he will get a bigger profit. Strictly speaking every Forex trade and stock on the market entails some level of speculation.

Currency speculation in the Forex market involves the buying and selling of currencies in the hope of making a profit from favorable exchange rate fluctuations, which is also applicable in the stock market. Studies conducted indicate that up to 95% of�Forex traders�are driven by speculation. The speculator in both share and Forex trading is characteristically in the market for a short term. A quick turnover drives the speculator. Speculation involves a high degree of risk.

"For Experts only"

Speculative techniques are used by the speculators in their decision making processes. The speculative techniques used in both markets are completely legal. But to facilitate effective use of the techniques more capital outlay is required. The trader also needs to be shrewd in judgment. Much is expected from the speculative investor. A new investor will find it particularly difficult to work based on pure speculation. The amount of capital required is just one of the factors that make it hard for new investors to work based on pure speculation.

Complete familiarity of the market and the market procedures is needed to enhance the chances of success in speculative trading. In the hands of a person who is well aware about the markets, the techniques can be used to good effect, while in the hands of a novice sure loss can be expected. A good example of the speculative technique often used in both markets is the buying on margin technique. However currency speculation can have dire consequences on a country’s economy; leading to a devaluation or inflation of a currency.