Stock market speculation, by definition, involves taking a position that will benefit from a certain outcome.

It is not concerned, necessarily, with underlying value, nor is it a view that tries to forecast the future for a particular industry or company purely beyond its short-term price action.

You see, when investors become speculators they are purchasing a stock with the sole purpose of selling it to someone else at a higher price.

Now, this may seem obvious at first glance, but it isn't!

Of course everyone wants to make a profit on the stocks they buy but there is a big difference between speculation and investing.

The Speculator:

He doesn't care about the inherent value of the stock. He or she only cares about whether or not they think it will go up in price as more and more speculators accumulate the stock.

The Investor:

He, on the other hand, looks at the logical value that may accrue over time as the particular stock price is affected by the ongoing business, the industry, economy and so on.

When speculation becomes rampant, as we saw in late 1999 in the stock market, it creates a situation that is impossible to perpetuate.

One of the most difficult things for most investors to understand is that in the investment markets, often the opposite of what you feel is actually the reality!

This means that when everyone is certain of a particular outcome, the odds of it happening are remote and this is why investment markets ultimately cannot exceed their borders.

Therefore, before a bear market has run its course, you should expect to see similar extremes of emotion as it reaches the bottom as you did when the bull market reached its peak!

Since the majority of investors are already convinced that stocks will never recover, you can be almost confident that the worst might be over.

If you think about this carefully, you will see why you must start planning for some "meticulous countermeasures!"