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Investments often are speculative investments. Investments are said to be speculative if the investor does not make adequate assessment of the financial assets on which investments are made or if the investor is interested only in short term gains through fluctuations in its price. Such investments have a higher risk as the short term fluctuations in the price of the financial asset does not necessarily reflect its real value.

Speculation can be beneficial as well as harmful. When a produce is in short supply and the demand high, the speculator invests in buying the produce with the hope that the increased short supply will drive up the price. The positive part is that the produce will last longer. The negative impact is that the increase in price and the short supply will exclude a section of the consumers. The speculation can also lead to hoarding of the produce that can induce an artificial scarcity denying consumers access to the produce. The higher price also gives incentive to the producer to produce more or import the produce.

Increased demand and higher price is a result of speculative buying. Similarly, the price is made to fall artificially with speculative selling which can lead to the price falling below its actual value. Often speculative buying shows up as a continuous rise in the price with more prospects of increased price. This is attractive to speculators who continue to buy more hoping to make a windfall of a profit at a later date. This speculative buying spree could reach a point when the speculators loses confidence and begins to sell. A selling spree can rapidly crash its price leading what has come to be popularly called ‘bubble burst’. Speculation is high in the foreign exchange market, a major economic activity. There are a number of useful learning tools that can assist anyone to learn about the forex market such as Learn Forex Live, Forex Trading Made E-Z, the London Forex Rush System and Forex Breakouts.

Increased speculative investment leads to short term volatility of the market that results in unstable price. The leads to a bubble that soon swells up beyond control and bursts. Such economic bubbles and bubble bursts too have been frequent in recent times. Increased bubble bursts do impact the larger economy creating an economic melt down. There is an increasing demand to control and regulate speculation. Suggestions ranging from a ban on speculation to ban on speculation in certain commodities such as oil to levying a penalty on speculation have been suggested. Tobin Tax, named after the economist James Tobin, has been suggested as a tax levied at 1 percent or lower.

Getting involved in a Forex business is not an easy task at all. So whatever happens, a business person should always be determined and dedicated to make his business successful.

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