The Art of Speculation

The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.” Jesse Livermore

Some see speculation as gambling and keep themselves away from it. Some see it as a profession and do it for a living. Some do it for consistent appreciation of wealth in order to beat inflation.

People speculate where money booms and dooms. Speculation is done on the prices of commodities, stocks, bonds and mutual funds. In real sense, speculation is an art and speculator, an artist.

Speculation has always been a profession and at times mistaken as gambling. But even in the world of gambling, there are rules, strategies and discipline to take care of oneself when things go wrong.

Like every other profession and in life only few win in the game of speculation.

An interesting factor of being a speculator is that most of the time you go wrong! Loses occurs more frequently than profits. The rule is to stop losses and let profits run.

Take care of losses; the profits will take care of themselves. It is not a game of how much can you make but how much can you lose.

Speculating is nearly to predicting the future. While speculating, it is the speculator who is the only foe and friend of himself… it is not the money nor the market conditions.

Speculation requires enormous emotional balance, discipline, appetite for risk and efficient risk management.

According to Dickson G Watts, a famous speculator who served as the president of the New York Cotton Exchange from 1878 to 1880, speculation is a venture based upon calculation. All businesses are more or less a speculation.

In his famous book, Speculation as a Fine Art, he emphasize on the personality traits and qualities required by a speculator. Those characteristics are self reliance, judgment, courage, prudence and pliability. Speculation requires great prudence in calculation and courage in execution.

The losing speculators always try to prove they are right. But the winning ones try to find when they are wrong and learn from their mistakes.

Recently, one of my friends who is a stock market speculator with a decade long experience told me that to win in the game of speculation one should possess the intelligence of half donkey and patience of thousand donkeys! In Dickson’s words, patience is sustained courage.

Let me conclude with an advice of Dickson to one of his trader friends, who got into a wrong trade which in turn disturbed his peace of mind – “If a speculation keeps you awake at night, sell down to the sleeping point.” Never take a risk that you can’t afford.


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