HOW IS STOCK SPECULATION DIFFERENT FROM INVESTING?

Stock speculation Trading is often concerned with taking advantage of short-term market fluctuations to make quick profits, following a short-term trading strategy. Investing, on the other hand, focuses on holding assets for a long period of time with the goal of generating steady returns and long-term growth. This difference requires market participants to understand clearly in order to make appropriate investment decisions.

1. What is stock speculation?

Stock speculation is the act of buying goods, hoarding, hiding goods and selling them at high prices in the short term to profit from the difference between the buying price and the selling price. Speculation affects and causes price fluctuations in the market. The form of speculation depends largely on supply and demand in the market.

Speculative stocks Speculative stocks are stocks that investors buy in hopes of making a quick profit from a short-term increase in price, usually a few days to a few weeks. This is a short-term investment, where the buyer is usually not concerned with the underlying value of the company or the long-term profits they may gain from holding the stock. Speculative stocks often appear in highly volatile market conditions or when there is specific information or events that may cause sudden movements in the price of the stock. Speculators often use technical analysis, news, and short-term trading strategies to predict and take advantage of these movements.

Here are some terms related to stock speculation:

1. Short selling: A form of selling securities that the seller does not own, often used to create a false appearance of stock price increases or decreases.
2. Pump and Dump: The tactic of causing a false increase in the price of a stock, then quickly selling it for a profit, often at the expense of other speculators.
3. Surf the transaction: Buying stocks low and selling them high within a short range, usually occurring when the market is consolidating with a narrow price range.
4. Buy now sell later: The strategy of buying stocks that are falling in price with the expectation that they will rise later, then selling when the price rises, often involves market forecasting and the technical situation of the stock.

2. The difference between stock investment and speculation

In many cases, the line between stock speculation and stock investment are unclear, causing confusion for many people. However, there are important differences between the two concepts:

3. Learn 20 terms about stock speculation

For investor participate in the stock market, understand about stock speculation terms is very important to be able to participate in trading effectively and safely. Below are 20 stock speculation terms that investors should know:

1. Speculative: The act of buying or selling a financial asset with the goal of profiting quickly from future price movements.
2. Speculator: An investor or trader who speculates.
3. Leverage: Use borrowed capital to increase your speculative ability and profit potential.
4. Buy (Long Position): Buying a financial asset in the hope that the price will increase.
5. Short Position: Selling a financial asset in the hope that the price will fall, often involving borrowing the asset from someone else.
6. Accumulation: Accumulate a large amount of stocks or securities before creating a price increase.
7. Distribution: Selling a large amount of stock or securities after the price has increased significantly.
8. Margin Call: A request from a broker for a speculator to deposit additional funds or sell assets to offset the risk of leverage causing losses.
9. Force transaction (Squeeze): A situation when short-term speculators are forced to buy back the financial asset they sold at a higher price.
10. Volatility: Volatility of financial asset prices.
11. Arbitrage: Profit from buying and selling the same financial asset in different markets to take advantage of price differences.
12. Hedge: Use one hedge to protect against risk in another asset.
13. Day Trading: Buying and selling within the same trading session to generate short-term profits.
14. Swing Trading: Trading is based on catching short-term price trends.
15. Scalping: Trade with the aim of making very small profits in a short period of time.
16. Market Order: Buy or sell orders are executed instantly at current market prices.
17. Limit Order: An order to buy or sell at a specified price or better.
18. Stop Order: An order to buy or sell when the price reaches a specific price.
19. Pump and Dump: The trick of raising the price of a financial asset and then selling it for a profit.
20. Speculative securities: Stocks, bonds or any financial asset purchased for speculative purposes.

These terms help describe strategies, actions, and market situations in the fields of speculation and stock trading.

4. Stock speculation risks that investors are likely to encounter

Speculation brings high profits, but also has many risks. The risk of speculation comes from the unusual and unpredictable fluctuations in the market. For example, when the prediction of stock prices is not consistent with the initial calculation, the speculative action will incur heavy losses and damages.

In addition, if investors do not clearly understand the nature of speculation, they may make regrettable mistakes. Speculative activities that do not comply with regulations and laws affect the stability of the market and can be considered a criminal offense.

Legal provisions on the crime of speculation are stipulated in the 2015 Penal Code. Securities speculation is considered a crime when the following conditions are met:

1. Take advantage of or create scarcity: This refers to the act of inflating the price of securities with the intention of making illegal profits.
2. Large quantity of speculative goods: Specifically, the amount of stocks or bonds must be large enough and qualify as a crime.
3. Big impact on the market: This includes market disruption, pushing prices beyond the control of the State Securities Commission and affecting the reputation of this organization, threatening the management and stabilization of the stock market, as well as negatively affecting socio-economic policies.

Sentencing for securities speculation is divided into 3 groups:

1. Group 1: Fines from 30 million VND to 300 million VND or imprisonment from 6 months to 3 years.
2. Group 2: Fines from 300 million to 1.5 billion VND or imprisonment from 3 to 7 years.
3. Group 3: Fines from 1.5 billion VND to 5 billion VND or imprisonment from 7 to 15 years.

These penalties depend on the severity and specific conditions of the speculative behavior.

5. Conclusion

Stock investment based on practical knowledge and skills to analyze and evaluate stock price fluctuations. In contrast, speculation often relies on short-term factors and does not have a solid foundation for making investment decisions.

Under the gaze of HVA, choosing between speculation and investing in stocks is a decision that needs to be carefully considered. First, realize that speculation and investing both have their own risks. Speculation can bring quick profits, but also comes with the risk of large losses, especially if you do not have the knowledge and experience to evaluate and manage the risks. In contrast, investing in stocks often requires patience and a solid understanding of the market, but can also bring stable and sustainable profits in the long term.

Second, be clear about your investment goals and horizon. If you are looking to make quick profits from short-term market fluctuations, speculation may be a good option. However, if you are looking to build a solid financial foundation and achieve long-term financial goals, investing in stocks is a wiser path.

Finally, always follow basic investing principles such as diversifying your portfolio, managing risk, and not letting emotions dictate your investment decisions. You should also stay informed about the markets and seek advice from trusted professionals when necessary.

In short HVA, believes that investing in stocks is often preferred over speculation, but the final decision depends on each individual's goals, knowledge and investment psychology. Invest wisely and with purpose, and always remember that patience and knowledge are the keys to success in the stock market.

Source: Onstocks