The most profitable type of trading is to buy into a market and then sell into it later on. This is called a buy/short position (the S-word to you old-timers).
You could also be a short seller, buying back in after you’ve sold in. You could also be a “long trader” who buys in the market, sells the shares later, and gets more profit.
The most profitable type of trading is to sell into and buy out a market. You could also be a long speculator who looks at an index to find out what will happen in the future.
For example, I might buy stock on a weekly basis and sell it after a period of time.
These three types of trading are what makes up 80% of all trading, at some point the other 20% becomes speculative trading by which you can make more money.
What percentage of your trading do you think is speculative?
I think it will be around 20%.
Is it possible to make more money from speculation?
Yes, yes it is. For example if you are a long speculator and you are looking at the market for a stock and are thinking “How would price do over time?” it is possible to find out. This way you could take more profits if the stock goes up.
Why might someone buy speculative trades?
Many people decide to buy speculative trades because:
They are a good way to get into an undervalued market and learn about it. A stock I believe in will be near its peak price in the future and can be bought at a lower price at a higher potential gain. For example, they could buy some of their own shares when the market for the stock is high and sell it when it is low. The stock price fluctuates based on what other markets like the S&P 500, NASDAQ, or KOSPI are doing the day. What is a good way to find out whether or not a stock is overvalued? It seems like such a simple thing to do, but it is very difficult. There are many technical indicators and mathematical formulas for calculating how to accurately predict stock returns.
Do I have to buy speculative stocks?
No, because speculative positions are actually called ‘market makers’. They pay commissions to brokerages such as Schwab Financial or Charles Schwab and they make money on their bets.
There are also investors that buy shares in securities that they believe in