Speculation is the act of trading in an asset or conducting a financial transaction that has a significant risk of losing most or all of the initial outlay with the expectation of a substantial gain. With speculation, the risk of loss is more than offset by the possibility of a huge gain, otherwise there would be very little motivation to speculate.

It may sometimes be difficult to distinguish between speculation and investment, and whether an activity qualifies as speculative or investing can depend on a number of factors, including the nature of the asset, the expected duration of the holding periodand the amount of leverage. Buying property with the intention of renting it out would qualify as investing, but buying multiple condominiums with minimal down payments for the purpose of reselling them quickly at a profit would undoubtedly be regarded as speculation.

Speculators can provide market liquidity and narrow the bid-ask spreadenabling producers to hedge price risk efficiently Speculative short-selling may also keep rampant bullishness in check and prevent the formation of asset price bubbles. Mutual funds optionsxpress vs interactive brokers hedge funds often engage in speculation in the foreign exchange, bond and stock markets.

The market trades around the world 24 hours a day; positions can be taken and reversed in seconds, utilizing high-speed electronic trading platforms.

The market is dominated by asset how to make money with magic paul daniels and hedge funds with multi-billion-dollar portfolios. Speculation in the FX market can be hard to differentiate from hedging, which is when a company or financial institution buys or sells a currency to protect forex speculation trading from market movements.

Foreign exchange market - Wikipedia

For example, a sale of foreign currency related to a bond purchase can be deemed either a hedge of the bond's value or speculation; this can be especially complicated to define if the currency position is bought and sold multiple times while the fund owns the bond.

It includes debt issues by governments and multinational corporations.

Prices can be very volatile, and they russia stock market chart strongly influenced by interest rate moves as well as political and economic uncertainty.

The largest single market is for U.

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While many pensions and individual retirement accounts are for long-term investments, market movements are frequently driven by speculators. Dictionary Term Of The Day.

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