Speculative trading or investing has always had negative connotations associated with it. It has been compared with gambling and often seen as the “dodgy” end of the investment game. “There are shady directors who work with shady brokers to fleece retail investors out of their hard earned money!”. Even though there are examples like this in the speculative end of the market there is definitely more to it than this.
The speculative market arguably provides investors with the greatest possibility of percentage gains out of any investment vehicle. “100 bags” is a popular term used by investors to describe the holy grail achievement of a 10,000% profit return on a particular investment. With many examples of these 100 baggers being achieved in the past more and more people are being drawn to the speculative end of the market in search of these lucrative gains.
With the potential for these sorts of gains also comes the highest possible risk of losses. Experiencing overnight drops as high as 95% or even higher is a common occurrence with Failed oil or gas exploration companies as a prime example. Managing risk is by far the most important quality that any trader/investor needs to understand to stand a chance of survival.
Finding a way to navigate through this jungle of potential exponential gains and losses is key to have any sort of long term success. I will continue to post my thoughts on the market in general, trader psychology and important factors for all new traders/investors need to know about.
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