The Function of Speculation Volume: How to Know the Level?

In a previous post, we discussed the harmful effects of speculation. In this brief post, I propose a function for Speculation Volume, as shown below:

In this formula we have: SV, which equals Speculation Volume; x, which always tends toward y; and DV, which is Trading Volume. It’s a simple function attached to the Speculation Volume Ratio, since that ratio works with this variable but doesn’t necessarily explain how Speculation Volume is calculated.

For example, imagine a product (x) with a real market value of R$ 1.00 being traded at R$ 1.50 (y). Suppose 10 units are traded (DV). Performing the calculation yields a Speculation Volume of 15%, which is considered a moderate level of speculation.

This function is regarded as a variant of the Speculation Volume Ratio and is proposed as a complement to market analysis, offering a consistent tool that could, in the future, become a metric for this condition as it varies with Trading Volume.

Now let’s imagine a more aggressive scenario. Suppose the same product, valued at R$ 1.00 in reality, is traded at R$ 3.50, and the traded quantity remains the same: 10 units. The calculation then shows a Speculation Volume of 35%, which is considered High Speculation, since the price is 250% above the real value—representing a significant distortion, possibly driven by scarcity, hype, or even market manipulation.

With this, it’s possible to build a categorical comparison of SV:

1) 0–10%: low speculation, the market’s common margin; 2) 11–25%: moderate speculation, indicating some speculative influence; 3) 26–50%: high speculation, representing a significant distortion; 4) 51% or more: extreme speculation, signaling strong signs of a potential bubble

This simple tool provides better guidance for market transactions, upholding principles of inclusion and democratization. It enables investors to see the trading scenario clearly and make the most favorable deal in any market sector. Finally, it’s essential to know the product’s real price — generally production costs plus up to 30% — to ensure cost coverage and profit.

What do you think of this proposal? Does the function deserve refinement? Please share your thoughts on whether it should be reviewed.