Speculation is the process of selecting investments with higher risk in order to profit from an anticipated price movement. Speculators have a particular view either bullish or bearish, on a particular asset and they profit from fluctuations in the asset prices. The biggest advantage of speculation is that it increases the volume and provides depth to the financial markets. It implies that investors can enter and exit at any moment. However, the disadvantage is that speculation can also cause prices to deviate from their intrinsic value if speculators trade on misinformation.

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