Stock speculation
Stock speculation is in the business a speculation , the shares or equity related to trading subject has.
Share speculation occurs when blocks of shares are acquired not with the aim of a long-term investment , but simply because of short-term profit-taking through a quick resale. In order not to be too guided by emotions, a stock speculator should follow a pre-determined investment strategy .
Shares are more suitable for speculation than other asset classes (such as fixed-income securities ) because their share price is usually more volatile and, due to many market participants, there is usually a higher level of market liquidity .
A traditional stock exchange rule states that small caps are usually more volatile than standard stocks and are therefore more suitable for speculation. It remains to be seen whether such a stock exchange rule derived from statistical data from the past can be applied to the future.
In recent years, derivatives on stocks have become established for speculation, which enable a relatively higher profit (or loss) with a lower capital investment. They are subject to future or option transactions on stocks, so that the leverage effect can increase the profit opportunities.
