A Member's Question about "Speculative

This is a good question so I figured I'd throw the response I sent for all of you.

The question....

"Quick question: when a play is speculative, does that mean there's a good chance it won't work? Or does it only mean make sure to reduce position size versus a usual full position size?"

The Answer:

Speculative can mean different things in different environments, but it never means the signals are poor quality, I don't put positions out that are poor quality, I'd rather miss a good quality set up because it wasn't "Great quality".

In this case, it means the market is so volatile that even with accumulation, similar to what happened in AAPL before it broke down and lost almost half of its value, "If the Hedge fund herd stampedes, it doesn't matter what signals are there-like with AAPL, they'll run them over".

We are at the point of insane volatility, much of it is below the water's surface like an Iceberg, you will see it and with it comes increased unpredictability, wilder swings and the increased or very high potential for a crack like the Nikkei has seen the last 3-days taking out about a month and a half of what have been nearly parabolic gains, so that's a pretty bad break and this increases not only from the volatility, but more specifically where the market is at and especially where the F_E_D is at. If anyone hasn't received the f_E_D's message loud and clear, they won't . We use to look at the placement of commas and punctuation in policy statements vs. previous ones, this is something altogether different, the F_E_D is coming out as they have been since September and telling us, "We are backing out and there is a bubble in the stock market we are very afraid of".

That's what speculative means here. Reduced position size, using stops more appropriate for your system of trading, making sure you are nimble and available, etc. There's increased market risk, but the trade signals and set ups are still great.