The Speculator’s Edge, Ten

The Speculator’s Edge, Ten

How Speculators get Paid

Congratulation! You now know all you need to know to begin to approach the markets as a speculator. You understand what the markets are and how they function. Most importantly, you understand that to win you must do your job as a speculator and you know exactly what that job is. The rest should be easy, right?

Wrong…

Most economists understand the theory of speculation and yet are unable to profit as speculators. Why should this be so?

Because the market is comprised of some pretty smart people with a lot of money who are trying to do exactly the same thing you are. These people are your competition. Their competition makes the markets pretty darn efficient (hard to beat).

Because it is human nature and the nature of the markets that even if you know what you’re supposed to do, you won’t want to do what you have to do when the opportunity arises. You won’t want to buy when things are bleakest, when blood is in the streets – yet this is precisely the time when there is the most supply for speculators to demand. You won’t want to sell when things are brightest either – but that is when demand is as high as it’s ever going to get and your job is to supply it.

Because the markets are a social process, they can do anything at any time.

And because, even when you think you have it all figured out, from time to time it is likely that you are going to be blindsided by some totally unforeseeable event that drastically disrupts or alters the whole valuation process.

Having said all that, it is possible, rewarding, challenging, and imperative for those who are able and willing to preserve their capital and endeavour to grow. It requires knowledge, the ability to observe, and the ability to act on what you know and observe. And, by the way, it can be incredibly fun – as long as you remember not to let its entertainment value deter you from your purpose.

Most people approach the market by attempting to forecast prices, instead of recognizing current or forecasting future conditions of supply and demand. Since we know better, we should approach any other tool we come across (technical analysis, fundamental analysis, contrary opinion etc) to determine their utility in helping us demand supply and supply demand – that is, helping us do our jobs as speculators.

The Speculator’s Edge

Albert Peter Pacelli