How to Speculate on Stock Exchange - Educational page by Freedom24 to increase financial literacy | Freedom24

Investopedia24

How to Speculate on Stock Exchange

You can buy in shares for various purposes. Someone wants to live off dividends, someone generates a ‘pension fund’ of their own, and someone just wants to make money in stocks. The latter are more common. Those are ‘gamblers’ who invest in shares for a certain period of time be it a couple of minutes or several years. Both short-term and long-term dealings in stocks have a very much transparent goal - to make a profit from the sale.

How do they speculate on shares?

Perhaps only a professional gambler may be called a speculator. It is an investor who constantly buys and sells shares, making deals almost daily. His or her capital is ‘flowing’ from one stock to another, from shares to bonds, from securities to currency and vice versa. A savvy speculator with a large capital or an ‘account leverage’ may gain millions on a single transaction. But he puts this capital to risks. There are a lot of large investors going bankrupt known to the history.

You can speculate on shares in two ways:

- gambling on the increase of the rate (buying up cheaper, selling high);

- gambling on a decline (selling shares borrowed from a broker high, and then purchasing them cheaper and thus paying off the ‘debt’).

Speculators do not really like blue chips, as their value does not change much. The more insecure the assets are, the higher is the possible profit.

A few words on how speculators manipulate the stock market.

Only prominent gamblers can actually manipulate (in every sense of the word). They initiate a massive takedown, artificially inflating shares’ value, and then they sell those at their highest prices. Also, speculators can un-load a large stock of shares, causing panic among other investors, and then, when the price reaches the bottom, they purchase stocks at their lowest. In any case, they play on mob psychology.

How to ‘gamble’ on the stock exchange if you are a new investor?

Do not ‘gamble’ at all - it is the only valuable advice for a new investor. Without deep knowledge of market, certain industries, deep understanding of all the principles and ‘rules’ of gambling, you are at great risk. And this risk is not always justified.

Nevertheless, if you want be accepted as one of the team of investors and make a profit, you can negate this risk.

We recommend:

- Do not invest everything you have, do not risk your house, apartment or car, do not take loans;

- Do not try to gamble by making short-term deals: the best option is to invest for 1-2 years;

- Do not play at the decline in exchange rate and you will not find yourself in debt to the broker if something does not go according to the plan;

- Always try to puzzle out the situation independently, taking into account the opinion of experts, but not trusting the forecasts unconditionally.

If you know where the tricky part of the shares is and do not set at stake too much, sooner or later you will understand this new world and its rules, and will be able to make profit and accumulate a not so bad capital. In the meantime, good luck!

Do you have any questions?
Get a free consultation from our specialists.

Submit a question