Stock speculation can be defined as the smallest share that a person can own in a public joint-stock company, which are companies whose shares are offered for sale by the public. The shareholder is entitled to a set of privileges and also has a share in the profits according to the number of shares he owns. Trading and speculation in shares are among the most popular and most attractive topics for traders from all over the world, as they are seen as an important source of income and profits.
Buying and selling shares for profit takes place in two ways. The first is to obtain a part of the annual profits of the company in which the investor owns shares, and the second method is through the investor selling the shares he owns after their price has risen and to achieve part of the profits. But is speculation in stocks different from trading in them?
Yes, there is a fundamental difference between trading in stocks and speculating in them. Trading is the process of buying and selling shares that an investor already owns to make a portion of the profits. For example, a person owns 1,000 shares in a company and expects their price to rise in the future, so he keeps them until their prices rise and sells them and make a profit equal to the difference between the share value at the time of sale and the original share value.
The same trader may buy back the shares of that company when its prices are low and sell it when its price increases in order to make a profit. This process is repeated over and over, and this is investing in stocks or trading in them.
What is the difference between investing and speculating in stocks?
In fact, there are fundamental differences between investment and speculation. In the first case, the investor already owns the shares of a company and sells and buys them as we mentioned earlier, but the situation is completely different with regard to speculation, as the investor, in this case, does not own the shares that he buys and sells.
In the financial markets, a group of stock speculative companies is spread, which in turn allows the trader to bet on the rise and fall of stock prices, and then carry out buying and selling operations via the Internet accordingly.
In this case, the purchased share is not owned by the trader, and the speculator in the stock market is also not entitled to receive part of the annual profits of the company whose shares he purchased for the purpose of speculation. In fact, it has not actually entered his ownership.
In the case of speculation in shares, the purchased shares do not enter the ownership of the buyer but are bets on prices
How to speculate in stocks – the way to trade stocks through the Internet
As we mentioned, the origin of speculative operations is betting. When a trader in the stock market expects an increase in the value of a stock, he buys it and then resells it when its value increases. In this case, the speculator gains the difference between the share price at the time of entering the transaction (buying) and the time of exiting it (selling).
But if the trader’s predictions are wrong and the value of the stock drops! In this case, there will be losses equal to the difference between the value of the stock at the time of purchase and the time of sale.
How do you choose the stock for speculation?
One of the many questions that everyone who wants to trade stocks is looking for an answer to is how to choose the best stocks for speculation, and is it better to speculate in American stocks or speculate in Saudi stocks?
There is an important point here, which is that all stocks are subject to the same conditions and standards when speculating, and they are also subject to the same rules of technical analysis and economic analysis, so it is not possible to be certain of the preference of one type over another, as this primarily depends on the speculator himself and his preferences.
For example, some traders prefer to speculate in stocks in the short term, in this case, it is appropriate to invest in the most or the fastest-volatile stocks in order to execute quick deals and get out of them with a good profit regardless of the nature of the stock, whether it is American, Saudi or any other stock.
But if the investor wants to trade long-term, in this case, he prefers to invest in the shares of emerging companies that are expected to achieve significant successes. These companies offer their shares at low prices “the value of the share upon subscription. ” In this case, the trader buys as soon as the share is offered for speculation and is patient for a period of time until the share’s value increases, after the company’s operations and commercial activities expand, and then sells the shares he bought at a profit margin.
Thus, it becomes clear to us once again that there is no difference when speculating in shares, whatever their nature and regardless of the country in which the company is located, in which there is an intention to speculate in its shares, this is subject primarily to the wishes and preferences of the investor.
Stock speculation trading for beginners
Day trading in stocks and stock speculation for beginners involves a large set of risks, especially for those who do not have the necessary experience. Such people have a threat of losing the entirety of the working capital, especially since some companies may collapse and declare bankruptcy, and thus the value of their shares collapses.
Therefore, the investor in stocks must choose the stock carefully and identify all the circumstances directly related to it and that has an impact on its prices, such as the company’s activities, operations, and financial disclosures in terms of profits and losses, in addition to expansion or contraction operations and the decisions of the Board of Directors that will certainly have a significant impact. on stock prices.
Before starting to speculate on stocks, the novice needs to familiarize himself with the methods of analyzing stock trends. Learn about the fundamental and technical analysis of stocks, which are the mainstay in predicting the trends and prices of stocks.
Factors affecting stock value
|The most important factors that affect stock prices
|The company’s activities and business operations
|Financial disclosures and periodic reports that deal with profits and losses
|Expansion or contraction operations (such as opening or closing new divisions and branches)
|Board decisions that often have an impact on stock prices
What are the causes of rising and falling stock prices?
With this, it becomes clear that daily speculation in stocks and speculation in stocks for beginners is not an easy thing, and no one can start trading and make profits whenever he wants to, there are many things that we will discuss in subsequent articles.