What is 'Speculation'

Definition: Speculation involves trading a financial instrument involving high risk, in expectation of significant returns. The motive is to take maximum advantage from fluctuations in the market.

Description: Speculators are prevalent in the markets where price movements of securities are highly frequent and volatile. They play very important roles in the markets by absorbing excess risk and providing much needed liquidity in the market by buying and selling when other investors don't participate.