Who Is a Speculator?

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WHO IS A SPECULATOR? ROLE OF THE SPECULATOR speculate |'spekyə lat| HOMEOWNER COIN COLLECTOR INDEX FUND INVESTOR ' Speculators play an essential role in maintaining To assume a business effective markets because they assume the risk that risk in hope of other market participants may not want. The liquidity gain; to buy or sell created by their participation in the markets creates in expectation of the cornerstone of balanced, efficient markets. profiting from market SOLD Speculation involves a number of complex economic fluctuations. In trading calculations and market forecasts that shape trading terms, speculating is the opposite of decisions. The speculator uses this research to hedging, which is the anticipate future price movements and accept market transfer of risk in order risk in an attempt to profit from buying and selling to make one’s costs Buys a home with hopes to Collects and sells coins Contributes to a shared pool futures and options contracts. more predictable. sell it when the market value that are highly valued of investments where profits The two types of trading exceeds the original price. because demand far out- depend on the performance go hand-in-hand – weighs the supply. of each component index. SPECULATION AND COMMODITY MARKETS you can’t have a free The role of speculators is often brought into question market without when price volatility increases for commodities such a balance of both. as wheat, crude oil and corn. The fact is that the participation of speculators adds liquidity to the markets. STOCK TRADER COMMODITIES TRADER SMALL BUSINESS OWNER This liquidity helps to moderate price swings and closes the gap between bids to buy and offers to sell. • The trading activity of speculators anticipates and warns others about shortages or surplus. 999.9 FINE GOLD • Prices are determined by a number of factors such as weather, global demand, government policy, energy costs and currency fluctuations. Buys a piece of a company Takes the position Puts down capital in order and sells it for a profit opposite hedgers seeking to grow a business to a point when that company’s stock to sell (farmers) or buy where its profits exceed its price increases. (food companies), in an operating costs. effort to profit from future change in price. FuturesFundamentals.org.

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