Take account of ecology. Where does the other side live? What does he eat? Does he respond best to slow or fast lures? Always consider the rhythms. Try to synchronize your activities with how fast or slow the currents are moving.

Everything is booked together. To get good results, pay attention to language, science, economics, literature, religion, and art. Remember Hamlet, “A man may fish with the worm that hath eat of a king and eat of the fish that hath fed of that worm.”

If you must know how good you are, enter a contest or tournament, but remember that completely different techniques are appropriate here from those that win in the normal day-to-day fray. The winner of a contest has nothing to lose and therefore takes much more risk than would be appropriate for you or I even to consider in the usual course of events.

Above all, be a contrarian. Once you hit a winner you’re very unlikely to find a winner in that same place. The best fisj swim deep and all fish are not caught with he same flies.

Everything is affected by the weather. When the moon is full the easiest pickings are often nearest at hand. The wind is your friend but often the direction of the wind changes the play and the response of the prey.

The weakest preys are the easiest to catch. When you see red on the battlefield, prepare to reel in the bigger winners.

Stay calm. Keep your emotions in check. A loud voice can upset your concentration and give away your position. The time for exhilaration is after you’ve bagged the winner and you’ve gone home to reflect on what you did right or wrong. Adapt a scientific approach. Keep records of what’s working and what’s not. Once you analyze the record you will be able to see what changes have the best likelihood of success. Especially if you’re doing badly, change something. Try another tack - change your bait. But be humble enough to know that there are many others better than you at the game and try to learn from these legends. Many of the greats offer seminars for “reasonable” fees and are happy to share their wisdom with you.

The cycles are always changing. Winning techniques for the morning are completely different from those at noon or the close.

Are You an Investor, a Speculator or a Gambler?

What exactly is an Investor, a Speculator or a Gambler in the context of the Stock Exchange Market or for that matter, any markets?

The Public as well as the Media have often loosely and interchangeably used these three terms. Comparisons are often made between their activities, but the terms are never explicitly defined.

You might ask if there is a need to be distinct on these terms. Well, there is definitely such a need simply because, if you want to profit from the market consistently, it is crucial to first, know who you are and how you are going to participate in the market. In fact, the mindset and methods employed by an investor, speculator or gambler differs extensively and greatly affect the profitability of participating in the market. How perilous it is to venture into the markets blindly!

The Public often called themselves Investors, perhaps, influenced by the Media. But how many of them are really Investors or even Speculators. Think about it, many of the self- acclaim Investors are actually habitual Gamblers, betting on the market on the slightest rumours, insider news, company news or fluctuations, hoping to get rich quick by chance. This is not a debate on whether gambling is good or bad, but if you’re going to gamble; don’t you think you have a better chance at the Casino, which is there for this purpose?

So, what are the differences between an Investor, Speculator and Gambler? In order to differentiate between them, we should start by defining them. If you’re sufficiently motivated, I encourage you to try to define the terms ’speculating’, ‘gambling’ and ‘investing’ before you continue reading this article… you may surprise yourself.

Consider the following.

Investor

An investor is an individual whose primary concerns in the purchase of a security are regular dividend income, safety of the original investment, and if possible, capital appreciation.

A person whose principal concern in the purchase of a security is the minimizing of risk, compared to the speculator who is prepared to accept calculated risk in the hope of making better-than-average profits, or the “gambler” who is prepared to take even greater risks.

In 1934, Graham and David Dodd addressed the issue and offered a definition of “investment” in their classic text book Security Analysis

“An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return.
Operations not meeting these requirements are speculative.”
- Graham and Dodd’s Security Analysis (original 1934 edition)

Speculator

Speculation is the buying, holding, and selling of stocks, commodities, futures, currencies, collectibles, real estate, or any valuable thing to profit from fluctuations in its price as opposed to buying it for use or for income - dividends, rent etc.

A speculator is one who is prepared to accept calculated risks in the marketplace for attractive potential returns.

Speculation: The activity of forecasting the psychology of the market.
Speculative motive: The object of securing profit from knowing better than the market what the future will bring forth.
John Maynard Keynes in The General Theory of Employment, Interest, and Money

Gambler

Gambling (or betting) is any behaviour involving the risk of money or valuables on the outcome of a game, contest, or other event in which the outcome of that activity is partially or totally dependent upon chance or on one’s ability to do something.

“A gamble is the assumption of risk for no purpose but enjoyment of the risk itself, whereas speculation is undertaken in spite of the risk involved because one perceives a favorable risk-return trade-off. To turn a gamble into a speculative prospect requires an adequate risk premium for compensation to risk-averse investors for the risks that they bear.”
- Investments by Zvi Bodie, Alex Kane, and Alan J. Marcus

Regardless of how you define the terms, it is likely to be a worthwhile activity to estimate your expected returns on both an absolute basis as well as relative to an appropriate benchmark. And if you find yourself enjoying the activity of investing or if you find yourself addicted to the speed and excitement of the trading game, perhaps you should seriously consider whether you’ve crossed the line between investing and speculation, or worse yet, maybe you are really gambling with your money.

Fundamental analysis
Fundamental analysis involves identifying the ‘value’ or ‘growth’ proposition of a stock using a range of methods. This approach endeavours to understand the fundamental drivers of this stock, analysing factors such as the company’s operations, the market in which it operates and general economic issues, in order to understand the stability and growth potential of a company.

Quantitative analysis
Investing has developed a quantitative approach, much like a ‘health check’ that looks for certain characteristics of out-performing stocks such as:

* an experienced management team
* strong cash flows and profit margins
* attractive financial performance ratios
* sector comparisons

The balance sheet can provide a measure of historical performance on key quantitative data that we use to analyse the stock. Historical performance is often compared against the current performance to pick up any signs of ‘out performance’.

Every stock has a different story and the key share price drivers identified in the fundamental & quantitative analyses determine whether it is a growth or value story.

Some of the key factors addressed in our reports include:

Revenue & Profitability
All revenue & profitability calculations are based on the last 3 years of available data.

To fully comprehend and accurately analyse the data included in the Revenue & Profitability table, it’s important that you understand the terms of each entry.

How each of the elements that make up the Revenue & Profitability table are calculated, and hints on how to track figures over the 12-month are summarised below.

Sector comparison
A comparison against the sector is the last fundamental analysis undertaken to determine the stock’s value. In our reports we summarise key ratio’s and performance indicators, compared to the sector average on rolling 12 month period.

Ratio Calculations and indicative behaviours
A few of the most common key ratio’s, how they are calculated and some ‘hints’ they may indicate are,