Speculation – Speculative Trading

Podcast Duration: 05:11

Hello friends and welcome to this podcast by Angel One.

Doston stock market mein sabhi log sirf ek purpose se enter nahi karte hain. Kuch investors aisi companies ke stocks kharidna chahet hain, jo consistently steady growth offer karti hain. Wahi, other investors look for higher returns in a smaller time frame. Moreover, kuch aise investors bhi hote hain, jinko company growth se kuch lena-dena nahi hota - all they care about, is usually price action of securities.

Doston, aaj ke podcast mein we are going to talk about the latter type - inko bolte hain speculators, and is type ki trading ko bolte hain speculative trading.

Are, lekin itni jaldi nahi.

Listen to this interesting story first.

Simi aur Rahul were friends from college - they were studying in the same business school before the lockdown. Aaj kal dono remotely study kar rahe hain, obviously.

At the same time, they are also exploring stock markets. Rahul came across something cool, and he thought of applying it.

During a hangout session with friends, Rahul ne apna plan baaki doston ko bataya - basically, he was going to buy a company jiske prices were climbing, but their business was not going very well.

Rahul said ki he had spotted a continuation pattern, and he wants to make a profit before exiting at the peak.

Simi got worried. Usne bataya ki this company is not showing very strong growth. Rahul ne bola - mujhe kaunsa invest karna hai - I just want a quick exit after a profit.

Rahul was right, and he did it too - his friends were impressed, and they asked him as to how he did it.

Doston, the rest of the story will sound familiar, after we return to our topic - speculative trading.

Speculative trading comes from speculation. Speculation comes from the latin word speculari - jiska matlab hota hai, to spy and observe. Don’t worry, speculative trading ka spying se kuch lena dena nahi hai. Basically, speculation is linked to predicting the future, or more importantly, predicting the future of a security’s price.

So essentially, Rahul’s point was that he was a speculator, not an investor.

Speculators usually securities ke price action par focus karte hain. On the other hand, investors basically invest karne ke pehle companies ko achchi tarah se dissect karte hain, by looking at their business, financials, historical performance, and so on. Ye information use hoti hai, in judging whether a company is suitable to invest in or not.

Lekin speculators aren’t concerned with all this.

Speculators price action par focus rakhte hain, and they trade on the basis of their predictions about a security’s price.

For example, bullish speculators expect ki kisi security ke prices rise honge, and they adopt a trading strategy accordingly.

Bearish speculators expect the opposite - they believe that a security’s prices are about to fall, and they deploy an appropriate strategy to make money from this movement.

Basically, speculators ko security ki fundamental value mein interest nahi hota. Instead, unka motive hota hai money-making from price action. So is this a good outlook to have in the markets? It depends.

Sabse pehle toh ye baat samajhiye. Speculators market ka ek bahut hi crucial hissa hote hain - because they bring liquidity to the markets.

Additionally, because speculators trade on the basis of price action, young companies unke money se benefit karti hain. Ye isliye, kyunki, speculators ka capital helps finance growth of these companies.

Lekin speculative trading has downsides too. For example, because speculators aren’t concerned about the fundamental value of a security, kabhi kabhi ye prices unreasonable levels tak inflate ho jaati hain.

Iska classic example hai 2008 ka housing bubble - during this, US mein real estate ke prices intrinsic value se kaafi upar climb kar chuke the. When the bubble burst, toh iska effect duniya bhar ki economies par dekhne ko mila.

Doston, speculation is not limited to stock markets only - as you just noticed. It can be done in currency markets and real estate too!

Lekin stock markets and currency markets have a lot of speculators. In the stock market, speculative stocks usually refer to high risk stocks - jaise penny stocks. Kuch speculators intraday trading par bhi focus karte hain, where they try to make profits from intraday price movements.

Toh doston, this is what speculative trading looks like. But how to do it?

Speculative traders usually fundamental analysis ke beyond technical analysis par focus karte hain. For this, they use candlestick patterns, and technical indicators like MACD, RSI, and so on.

Are you interested in speculative trading? If yes, toh aapko technical analysis study karna hoga.

What’s good, is that you can start right away - check out our other podcasts and videos on various candlestick patterns and technical indicators. If you are still looking for more, don’t forget to visit our website www.angelone.in.

Hope you enjoyed this podcast. Milte hain, in the next one.

Until then, goodbye from Angel One, and happy investing!