In any particular case, speculators can succeed either because of (1) random chance or (2) some rational basis for their correct anticipations of market trends. It is extraordinarily difficult for any outside observer to distinguish which of these two factors is predominant in a given instance. Any such distinction would require an exceptional insight into the market process, enabling one to "outguess" the speculators under discussion. In effect, therefore, such a critic would have to be better qualified than the speculators being observed, even though the latter were already selected as the most skillful by market competition! In general, individuals who truly possess such market insights will apply it by investing either their own capital or else the accounts of others, thereby displacing any speculators of lesser ability from the market.
To the extent that speculation is based on random luck, it will tend to incur both profits and losses that cancel each other out over a long period of time. Over a briefer period, however, such speculators suffer the disutility associated with high risk (pp. 4.9:1-5)—a disutility which tends to discourage speculation of this first type.
On the other hand, to the extent that speculative profits are based on rational anticipation, their effect is to smooth the movement of prices toward their future level—as illustrated in the next example. 
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