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An Introduction To Online Trading
by Kevin Stith
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When talking about online trading, it is important to understand the term speculation. It is hard to define the term speculation with any precision in context of online trading, but one must realize that investment and speculation are somewhat different and yet similar. Speculation requires an investment, and investments are at least somewhat speculative.
In online trading, investment usually involves putting money into an asset which is not necessarily marketable in the short run in order to enjoy the returns the investment is expected to yield. On the other hand, speculation is usually a more short-term phenomenon. Speculators tend to buy assets with the expectation that a profit can be earned from a subsequent price change and sale. Accordingly, they buy marketable assets which they do not plan to own for very long.
Probably the best way to make a distinction between investment and speculation is by considering the role of expectations. Investments are usually made with the expectation that a certain stream of income or a certain price, which has existed, will not change in the future. Speculation, on the other hand, is usually based on the expectation that some change will occur. An expected change is a basis for speculation but not for an investment.
Speculation involves a higher level of risk and a more uncertain expectation of returns, but in many cases the investors are also in the same boat. The investor who thinks that the market fluctuations of his investments are not of interest to him because he is buying solely for income can very well be compared with the ostrich burying its head in the ground during danger and feeling himself secure. The trained speculator takes action only when the probabilities are higher in his favor.
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Article Source: www.homehighlight.org
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