What factors you have do you count on to speculate effectively?
"Strategy would be my top factor.  While this may be implied, I do think it helps to have an idea of what is causing the buy and sell signals in speculating as I'd rather follow a strategy than try to figure things out completely from scratch that doesn't quite make sense to me. There are generally a couple of different schools of analysis that may be worth passing along: Fundamental Analysis:Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. When applied to futures and forex, it focuses on the overall state of the economy, interest rates, production, earnings, and management. When analyzing a stock, futures contract, or currency using fundamental analysis there are two basic approaches one can use; bottom up analysis and top down analysis. The term is used to distinguish such analysis from other types of investment analysis, such as quantitative analysis and technical analysis. Technical Analysis:In finance, technical analysis is a security analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis use many of the same tools of technical analysis, which, being an aspect of active management, stands in contradiction to much of modern portfolio theory. The efficacy of both technical and fundamental analysis is disputed by the efficient-market hypothesis which states that stock market prices are essentially unpredictable. There are tools like ""Stock Screeners"" that will let you filter based on various criteria to use each analysis in a mix.  There are various strategies one could use.  Wikipedia under Stock Speculator lists: ""Several different types of stock trading strategies or approaches exist including day trading, trend following, market making, scalping (trading), momentum trading, trading the news, and arbitrage.""  Thus, I'd advise research what approach are you wanting to use as the ""Make it up as we go along losing real money all the way"" wouldn't be my suggested approach. There is something to be said for there being numerous columnists and newsletter peddlers if you want other ideas but I would suggest having a strategy before putting one's toe in the water."
"Well said. And I get it, really I do. Rational means something very specific in the theoretical model of EMH, and it's not the same way that ""rational"" is usually used.  When a person actually gets to the point where he can trade on the stock market, you expect they would have information like ""know which stock you're trading"". Maybe these people didn't.  And even if we assume people have perfect information, they still make mistakes. Regularly. Repeatedly. Sometimes predictably. And those mistakes can overwhelm the right-price-finding effect of EMH." thanks for the advice, I still have few weeks before my master course starts and would like to do more reading regarding trading, any books that you would recommend ?   Also I always assume that modelling skill is not that important in sales and trading, is my assumption correct ? Modelling is probably one of my weak skills but if it is needed I would like to work further on it   thank you I'd say the opposite of hedging is speculating.  If you are convinced an asset will appreciate in value, or rather the probability of gains is enough to induce you to hold the asset, you are a speculator.  There are lots of ways of speculating, including holding risky assets without hedging that risk and possibly magnifying that risk and return via leverage or the embedded leverage in a derivative contract. Generally speaking, if in expectation you are paying to reduce your risk, you are a hedger.  If you are (in expectation) being paid to bear the risk that otherwise someone else would bear, you are a speculator.  The word speculation has been tainted by politicians and others trying to vilify the practice, but at the end of the day it's what we are all doing when we buy stock or any other risky asset. Do You Consult Or Just Do The Job?…..   For as long as I can remember I have always sought out information, knowledge, facts, figures.  One of my ex-bosses once said to me that I could always be relied on to find untapped resources &amp; deliver.  This was when I was in my early 20′s &amp; its a skill that I feel is vital for the success of any business.  My second job, when I was 19yrs old was in an Advertising / PR company - I was the Secretary.  Part of my remit was credit control &amp; book-keeping, for some reason I was always naturally interested in sales units sold &amp; values – then see how the total sales compared to the previous month / year.  Little did I know, this was a good skill for Profit &amp; Loss sheets in years to come! Well, yes.  Lewis (and anybody) is presuming that you accept take advantage of good fortune.  In his own example, though, he wasn't in any way prepared to go into finance.  Having gotten there, and established himself even, he pitched it in favor of writing a book.  Neither of those examples supports everyone calling luck the result of work plus brains. "Be familiar with and able to verbally run through how to do a discounted cash flow analysis. Additionally be up to date with current financial market(s) trends, both domestically and globally. Know where the U.S bond yields are trading, and where they are going, interest rates too. Apart from that big picture stuff I wouldn't stress too much about technicals because he/she may not even ask about them at all if its more of a ""fit"" interview." "Suggest concretely writing out the 3-5 traits you're looking for, gaps you're looking to fill.  Assign an acronym to each bullet.  When you plan out your questions, write the acronym of the bullet you're looking to assess next to each Q.  If none fit, you should seriously consider why you're asking the question.  Here's some examples I used for a sales-related search:  ""(PO) Process Orientation - Understands the anatomy of sales, stage breakdown and discrete steps in a sales process. (CR) Creativity - Doesn't need a well established playbook of scripts, processes to make deals happen. ...""" Well, what I would do would be to read every journalist's article on the subject, every academic paper, and the appropriate chapters from the CFA curriculum. I'd write down everyone's name (authors and those mentioned) and then email call them for advice. I'd try to find out who those players are, what their specific philosophies are, and then find someone i thought was really smart, had an investment philosophy that I agreed with, wasn't a dick, and then I would call them.   By the way, Warren Buffett went to Columbia to learn specifically under Ben Graham. Prior to graduation, Buffett said he'd like to work at Graham Newman for free, such was the value of the education. Benjamin Graham told him (Warren), he wasn't worth that much.   You or I literally have nothing to offer these guys that they can't get somewhere else (smarts, hard work, etc) for better. I'd be humble, attentive, and humble (did I say that already). There's an intellectual honesty that comes with admitting you don't know anything (but are willing to learn) that is very much important.  That's what I would do. Did any of that help? If you are looking for money to speculate in the capital markets, then your brokers will already lend to you at a MUCH more favorable rate than an outside party will. For instance, with $4,000 you could EASILY control $40,000 with many brokers, at a 1% interest rate. This is 10:1 leverage, much like how US banks operate... every dollar that you deposit with them, they speculate with 10x as much. Interactive Brokers will do this for you with your current credit score. They are very reputable and clear through Goldman Sachs, so although reputable is subjective in the investment banking world, you won't have to worry the federal government raiding them or anything. If you are investing in currencies than you can easily do 50:1 leverage as an American, or 100:1 as anyone else. This means with only $400 dollars you can control $40,000 account. If you are investing in the futures market, then there are many many ways to double and triple and quadruple your leverage at the lowest interests rates. Any contract you enter into is a loan from the market. You have to understand, that if you did happen to have $40,000 of your own money, then you could get $4,000,000 account size for speculating, at 1% interest. Again, these are QUICK ways to lose your money and owe a lot more! So I'd really advise against it. A margin call in the futures market can destroy you. I advise you to just think more efficiently until you come up with a way to earn that much money initially, and then speculate. No, and using a 37 year old formula in finance that is as simple as: should make it obvious technical analysis is more of a game for retail traders than investment advice. When it comes to currencies, there are a myriad of macroeconomic occurrences that do not follow a predictable timescale. Using indicators like RSI on any time frame will not magically illuminate broad human psychology and give you an edge. It is theoretically possible for a single public stock's price to be driven by a range of technical traders who all buy at RSI 30 and sell at RSI 70, after becoming a favorite stock on social media, but it is infinitely more likely for all market participants to have completely different goals. In fact markets are not efficient and participants are not rational. That is why we have booms and busts in markets. Emotions and psychology play a role when investors and/or traders make decisions, sometimes causing them to behave in unpredictable or irrational ways. That is why stocks can be undervalued or overvalued compared to their true value.  Also, different market participants may put a different true value on a stock (depending on their methods of analysis and the information they use to base their analysis on). This is why there are always many opportunities to profit (or lose your money) in liquid markets. Doing your research, homework, or analysis can be related to fundamental analysis, technical analysis, or a combination of the two. For example, you could use fundamental analysis to determine what to buy and then use technical analysis to determine when to buy. To me, doing your homework means to get yourself educated, to have a plan, to do your analysis (both FA and TA), to invest or trade according to your plan and to have a risk management strategy in place. Most people are too lazy to do their homework so will pay someone else to do it for them or they will just speculate (on the latest hot tip) and lose most of their money. There's a grey area where investing and speculating cross. For some, the stock market, as in 10% long term return with about 14% standard deviation, is too risky. For others, not enough action.  Say you have chosen 10 penny stocks, done your diligence, to the extent possible, and from a few dozen this is the 10 you like. I'd rather put $100 into each of 10 than to put all my eggs in one basket. You'll find that 3 might go up nicely, 3 will flounder around, and 4 will go under. The gambler mentality is if one takes off, you have a profit.  After the crash of '08, buying both GM and Ford at crazy prices actually worked, GM stockholders getting nothing, but Ford surviving and now 7X what I bought it for.  Remember, when you go to vegas, you don't drop all your chips on Red, you play blackjack/craps as long as you can, and get all the free drinks you can. I was referring to insider information as a seperate means of profiting. So I assumed:  1. Fundamental analysis/picking the direction 2. Insider information 3. Gaming the market (illiquid markets)  If this is true. What makes a good market maker? Stoploss/takeprofit management and hope there are enough players in it *not* to win it (i.e. hedge positions) to take profit from?  Sounds very luck base or is there something im missing?  Thanks "There are some assumptions which can be made in terms of the flexibility you have - I will start with the least flexible assumption and then move to more flexible assumptions. If you must put down a number 1, your go-to for this(""Change the start period to 1""), is pretty good, and it's used frequently for other divide-by-zero calculations like kda in a video game. The problem I have with '1' is that it doesn't allow you to handle various scales.  Some problems are dealt with in thousands, some in fractions, and some in hundreds of millions. Therefore, you should change the start period to the smallest significantly measurable number you could reasonably have. Here, that would take your example 0 and 896 and give you an increase of 89,500%. It's not a great result, but it's the best you can hope for if you have to put down a number,  and it allows you to keep some of the ""meaning in the change."" If you absolutely must put something This is the assumption that most answers have taken - you can put down a symbol, a number with a notation, empty space, etc, but there is going to be a label somewhere called 'Growth' that will exist. I generally agree with what I've seen, particularly the answers from Benjamin Cuninghma and Nath. For the sake of preservation - those answers can be summarized as putting 'N/A' or '-', possibly with a footnote and asterisk. If you can avoid the measurement entirely The root of your question is ""What do my manager and investors expect to see?"" I think it's valuable to dig even further to ""What do my manager and investors really want to know?"". They want to know the state of their investment. Growth is often a good measurement of that state, but in cases where you are starting from zero or negative, it just doesn't tell you the right information. In these situations, you should avoid % growth, and instead talk in absolute terms which mention the time frame or starting state. For example:" I trade futures. No FX or equities though. It is my only source of income, and has been for about 5 years now.   Equities and FX, to me, seems like more of a gamble than Vegas. I don't know how people do it.