A speculator on the stock exchange and
Who is a speculator?
The Speculator (from Latin. speculatio - stalking, stalking) - a legal or private person who enters into a transaction in order to profit from changes in the price of an asset being bought or sold. Depending on price fluctuations, the speculator chooses the time of opening and duration of holding a position.
In the stock markets, speculators are commonly referred to by the word Trader.
What role does a speculator play in the stock market?
Speculators on the stock exchange perform several functions:
- The hedgers' risk is transferred to the hedgers, which allows the latter to negotiate the price with the sellers much faster;
- play the role of a kind of "bridge" between the bid and offer prices of securities, which increases the efficiency of the exchange;
- contribute to the overall liquidity of the market. Thanks to speculators, transactions in the most popular assets take place without any delays;
- "attract" a large number of new buyers and sellers to the market by artificially increasing demand for existing assets;
- increase the overall level of competition on the exchange, which allows for a more accurate market price;
- eliminate existing price swings on the exchange and ensure overall market stability;
- increase demand for futures contractsby buying them at low prices, or reduce it by making overpriced deals.
How does a stock speculator differ from an investor?
The concepts of "speculator" and "investor" are often confused, because the task of the latter is also to earn money by increasing the value of purchased assets. At the same time, the commodity itself is not interesting for both the investor and the speculator. But there is a difference between these players, and it is as follows:
- The speculator profits on both price increases and decreases. An investor plays only on the upside;
- A speculator conducts up to ten operations per day, while an investor focuses on the long term;
- A speculator may have a minimum amount of capital, because he expects to receive profit from a future transaction. An investor, as a rule, has a serious capital.
- speculator buys assets and rarely follows the actions of the issuer. An investor, after buying securities, always closely observes changes in the economic indicators of the company.