According to the dictionary, the word ‘speculation’ means earning money by predicting if something will happen or not. This is exactly what you’re doing when you decide to speculate with your money to make more money. You make a prediction based on available data to determine if you should buy or sell a certain financial instrument.
Where & how to speculate
Speculating is something you can do with online brokers through contracts on the underlying value of the instrument. This form of trading is best for speculating because the fees are very low. By speculating correctly and using a feature called leverage, you can make a lot of money with only a very small investment.
In the beginning it might seem like speculating is very hard, but by practising day in and day out you can learn how speculation works and how you can make more and more money. Brokers give you the option to speculate completely risk-free using a free demo account, so you can practise under real market conditions using a fictional amount of money and discover how to earn money on the stock exchange.
Sources of information
Private traders engaging in speculation have two main sources of information: the news and technical levels. These sources are explained below. However, always keep in mind that:
- You are making a decision on incomplete information.
- It is impossible to predict the exact direction of the price.
- The same information can be explained differently by different people.
The first source: news
The first source of information that you can use to make decisions is the daily news. There are dozens of informative websites where you can find tons of information. Websites that provide economic news are especially good sources for speculators.
It’s the art of being the first and being the fastest. Markets respond to news, whether it is good or bad. They respond and therefore you should respond too.
When you consume the news, you should always think about how that news will affect certain markets. What will be the effect of a news item? Will traders react neutrally, positively or negatively to the news? News is particularly useful when you’re trading company shares. Any kind of news involving the company can have an effect on the price of the company’s shares. If you prefer to trade Forex, the news isn’t usually an interesting source of information. It’s better to use technical levels.
The second source: technical levels
Speculating can go very well if you’re keeping an eye on technical levels. Technical levels are levels where the price sees resistance or support. These levels are easy to see, so you don’t need complicated training to recognize them.
Recognizing the important horizontal levels isn’t hard at all. By practising with charts and patterns, you can predict the direction of the price simply by looking at a chart.
These levels are crucial trading moments. Around these levels there is a battle between buyers and sellers and the probability of a direction change of the trend is probable. By practicing a lot with graphs and trading patterns you can spot opportunities that can make you money.