Stages of the Speculator
Defining the term speculator actually comes from an early Latin term speculare meaning to "look out for trouble." This is fitting. Speculators look out for trouble while gamblers seem to look for it. It is a play on words I understand, but it's the difference between trading and gambling. As I said yesterday, where there is a difference of opinion on the value of something, the breeding of speculation occurs. It is important to realize that speculation is a social thing, not an economic thing. Traders don't speculate to provide the economy with some sort of boost in consumption. They did it to raise monies for declaring greater stature. Many of us declare that we want to trade for a living out of desire to stay home with our children and to avoid corporate America. However, many of us still buy the new cars, live in the bigger homes and travel more. It's a natural tendency to consume more when one derives more resources to do so. I do not see it as a bad thing, but let's not fool ourselves in our reasons for choosing speculation as a trade. Remember, the closer to a true reality we are, the clearer our minds are to read the market.
Threei talked previously about traders mistakenly thinking they are experts in the medical field, geologists in reading mining maps or some other profession that requires more study than a simple 10-Q reading. Speculators are not about determining the future value of a company's net worth.They are detached observers of the psychology of the market.Too often we see opinions based on illusions by people that pretend to be something they are not. Early stage speculators are born of the need for some certainty. They want reliable patterns, proven and provided, on a basis by which they can trade from. Eventually they realize that the simple following of systems and patterns provided do not reveal desired results. Sadly, more often than not, this leads to a frustration rather than a continued quest for reality. Many times these frustrations can be seen in thought and words expressed as attack and skepticism. The philosophy that a human being is fearful by which they are guilty of themselves, is true in the market. An early speculator, mostly likely is not a great early trader and so feels that no one is. This early stage is apart of the learning process. They must fall for the traps, find themselves in the wrong situations and are forced to follow the opinions of others. Further, these early speculators create their own opinions about subjects that they do not understand. Their opinions can certainly sound reasonable, but the reality is that they are off base. For example, I have no idea about the physics or aeronautics, but I'm sure I can write a paper on gravity just from simple observations that would get at least a B grade.
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