Investors and traders are always seeking the next big thing or trying to get rich by taking hot trades without calculating the risk. While this may work occasionally, it is not something that you can depend on regularly. To truly build wealth and income from market speculation you need two things: a rule-based strategy and the discipline to follow that strategy.

Many people don’t feel you can calculate risk effectively enough to be a consistently profitable market speculator. That is not the case. When you learn a strategy that allows you to know exactly how much your maximum profit as well as your maximum loss might be, that’s the definition of calculated risk. When the odds are in your favor, you win more than you lose, and you can become consistently profitable.

Traders need to minimize distractions and have a set of rules to follow. When you know your rules, and trust them, you can place your trade and let them run knowing that no matter the outcome, it was part of your plan.

Online Trading Academy’s Patented Core Strategy is designed to place the odds in your favor by mimicking the actions of the trading institutions who are responsible for moving the market prices themselves. Following this simple set of rules does put the odds in your favor and changes the game from uncalculated risk to high probability market speculation.

Take, for instance, the type of stocks to trade. Many people try to pick what are called penny stocks. They select these stocks because they are inexpensive, so they can buy many shares and hopefully strike it rich with a sharp rise in their stock. This is uncalculated risk because these stocks are too volatile and there is no guarantee that their stock will rise in price, it’s a shot in the dark.

Speculation on these stocks using the Core Strategy I mentioned above would also not work. There is simply not enough institutional participation. In the following data for SIRI, you can see even though the stock has a float over one billion shares and a market cap over $32 billion, institutions only own 19% of the shares. This is hardly enough to find high probability, low risk, high reward opportunities on a regular basis.

Chart

Compare this to the stock for EBAY. The market cap is only five billion more than SIRI’s and there are a lot less shares available. But EBAY would be a much better stock to trade and invest in since it has an 88% participation by institutions. This means that you can clearly see the patterns made by institutional buying and selling and therefore put the odds in your favor to trade it by using Online Trading Academy’s rule-based strategy.

Chart

Trading and investing with a rule-based strategy changes uncalculated risk into high probability, high profitability market speculation. Put the odds in your favor by learning the right way to trade and invest and joining a community of traders that can not only help you learn the strategy but maintain the discipline to follow the strategy on a regular basis.

On a personal note, I am writing this article in an airport lounge in Lisbon, Portugal on my way to Nice, France to get married! While you are reading this, I will be enjoying my honeymoon in Southern France and Portugal. Thank you to all friends and family who will be celebrating this joyous occasion with me. And thank you to all of my readers who enjoy the bits of knowledge I share to help improve your abilities in the financial markets.

Read the original article here - Speculation Means Taking Calculated Risk

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This content is intended to provide educational information only. This information should not be construed as individual or customized legal, tax, financial or investment services. As each individual's situation is unique, a qualified professional should be consulted before making legal, tax, financial and investment decisions. The educational information provided in this article does not comprise any course or a part of any course that may be used as an educational credit for any certification purpose and will not prepare any User to be accredited for any licenses in any industry and will not prepare any User to get a job. Reproduced by permission from OTAcademy.com click here for Terms of Use: https://www.otacademy.com/about/terms

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