Speculation vs investment: which is better?

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Speculation vs investment: which is better?

Category : Strategy

When choose his own approach to the financial market, each manager faces a situation where he determines the fundamental data of his trading strategy. Thus, by what method the trade will be conducted, which risks parameters and money management should be used, and the choice of the time interval on which fix api trading will be conducted. All these methods and parameters determine the two most important approaches in trading – speculation and investing.

Speculative trading is based on the short-term opening of positions in various financial assets and it is accompanied by a short hold of transactions. Fixapi trader conducts an analysis of the asset and trades at a time of high volatility of the market to obtain maximum profitability, but together with this, the risk increases.

Investing consists in a comprehensive analysis of the financial asset and the opening of long-term positions with the goal to fix the full potential of the movement or trend. This approach allows us to diversify and reduce risks, but at the same time it has less profit potential than speculative trading.

A lot of traders lead a lengthy dispute, determining which approach is more sustainable or acceptable for use in the financial market. As for me, I believe that speculative trading should be conducted at the fix apiforex market. As for investing, you should allocate funds in the stock market and to a different group of assets in order to increase diversification. The main goal for investment is to demonstrate profitability more than the growth of key benchmarks, such as the S&P 500 and DowJones 30. The purpose of speculation is to make the yield twice as much as the investment.

The choice of which approach to follow is up to you. To facilitate your decision, I propose you to consider the key parameters of each kind.

Speculative trading:

  • Does not require a high threshold for entry. There is an opportunity to use broker credit shoulders to start with small amounts;
  • Must be based on a combination of fundamental and technical characteristics for trading on D1 (http://forexrobotsreview.us/2017/06/21/technical-indicators/). If we conduct intra-day trade, then one of these two types will be sufficient;
  • Trading operations are held for no more than a month;
  • The potential risk is proportional to the yield and may be half of the percentage of probable profit;
  • Can be conducted in a speculative market;
  • Lateral movements make this kind ineffective;
  • Can be based on the output of high-profile news;
  • It does not matter which assets will be traded. The main goal is to make a profit from any movement;
  • An algorithmic approach for fixing transactions is used under scalp or fix api arbitrage transactions (https://fxsocialnet.com/).

Investment:

  • The ratio of risk to profitability can be about 1/5;
  • Itallows you to save capital and earn on dividends (when it comes to the stock market);
  • Trading operations are carried out with a term of more than one year;
  • An algorithmic approach is not used, instead statistical and mathematical analysis for constructing models of the future value of a financial asset;
  • Return shows the best growth in the stock market;
  • Fundamental analysis is used to determine investment, and to open a trading position, a number of fix api traders use technical analysis;
  • A group of assets (funds) can also be invested at the same time, or vice versa, to diversify your risks and divide assets between sectors, core business, potential and a group of securities.

I hope these characteristics will help you make the right choice in favor of one or another way of trading. The main thing to remember isto go for both speculation and investment should be consciously having a ready trading strategy.

 


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