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Speculation (also known as speculative trading) is a financial term that refers to the act of purchasing an asset (a commodity, good or real estate) that has a substantial risk of losing value but also holds the hope of gaining value in the near future.

Speculative purchases in the spot market are done with the intent to sell the currency relatively quickly. Many speculators will hold foreign currency that they buy in the spot market for a mere 15 to 20 minutes. After this time a speculator simply decides to take her gain or loss, and to start all over again.

An alternative form of position-taking is by borrowing the weak domestic currency, selling it for the strong currency, and placing the funds in a bank deposit. If the domestic currency then depreciates, the speculator can unwind the position and make a profit.

By following the 5 steps listed below, you can start your trading journey in currencies in a smooth and efficient manner. Get to know what drives the market. ... Choose the right broker. ... Establish your financial goals and targets. ... Practice with virtual trading. ... Start slow and go easy on your trades.

Currency speculation is the act of buying and selling the money of various countries in order to take advantage of fluctuating exchange rates. Some speculators make many transactions each day with one or more currency pairs, while others purchase a large amount of one currency and then hold on to it for a longer time.

Under a currency board, the management of the exchange rate and money supply are given to a monetary authority that makes decisions about the valuation of a nation's currency. Often, this monetary authority has direct instructions to back all units of domestic currency in circulation with foreign currency.

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