Speculators are any person or organization that trade the markets with the goal of making a profit. All retail traders like you and I are speculators however this also includes the big fish like market makers and large trading firms. When your trading futures it's important to know the role of each trader in the market and what they are trying to do.
The following are the most common types of speculators you'll find in the market:
Retail or Individual Traders - Anybody using their own funds to trade with the goal of making a profit. The ease of access from the Futures market has caused the number of retail traders to skyrocket in the past decade.
Market Makers - Large trading firms that have signed a contract to provide liquidity in the market. These market makers buy and sell positions in exchange for special privileges such as reduced trading fees.
Hedge Funds - Is a collection of investments that use innovative investment strategies to capitalize on profit. Hedge funds have the ability to make very large impacts within the futures markets due to their account size.
Proprietary Trading Firms - Trading firms that let traders trade with large amounts of money and make money by taking a percentage of the trader's profits. Many firms train and then fund traders so that they can make a lot of trades throughout the day. A trader trading on behalf of a Trading firm usually has access to a large amount of cash and may have access to trading strategies and data similar to that of a hedge fund.
Hedgers
A hedger is a person or most likely a firm that buys and sells the actual commodity they are trading. Unlike speculators they are looking to keep their commodity they produce or sell from declining or they look to minimize damage to their profits by entering the market and offsetting any potential drop in price. Many hedgers are market insiders whose business is directly affected by the change in market prices. Hedgers are an essential part of what moves the markets.
Not all hedgers are the same, and their goals may be different, hedgers can usually be sorted into three categories:
Sell-Hedgers: Worried about falling prices. A wheat farmer may take a short position in the Wheat futures market in order to protect against the possible decline in the price of wheat. So if the price of wheat rises the farmer makes money and since he is in a short position in the market if the price of wheat drops he will still make money.
Buy-Hedgers: Worried about rising prices. A construction company that uses iron may be concerned about the price of iron rising, which may affect profit. In order to reduce the risk if the price of iron does in fact rise, they may take a long position in the iron futures market, that way they are still making a profit.
Merchandisers: Are buying and selling futures. Merchandisers are usually spread trading different markets at once.
Conclusion
Both hedgers and speculators make up a healthy futures market. Speculators are simply looking to take profit from either buying or selling the market, while hedgers are looking to protect themselves from either rising or falling commodity prices that can directly affect their business. In a healthy market, these forces balance out each other.