Long Positions

A long position, or simply being "long", means you own an asset or a contract that gains value when the price rises. If you buy 100 shares of a company, you are long 100 shares. Going long is the most familiar kind of trade: buy low, sell higher. Its opposite is a short position, which profits when prices fall. See Short Selling.

How a long trade works#

A long trade has two steps: open by buying, close by selling.

Long P&L = (Exit price − Entry price) × Quantity − Costs

The most you can lose on a long stock position bought without borrowing is the full amount invested, if the price goes to zero. The potential gain has no fixed limit, because a price can keep rising.

Ways to be long#

You can be long through many instruments, each with different risk:

Unrealised and realised profit#

While your position is open, any gain or loss is unrealised: it exists on paper and changes with the price. When you sell, it becomes realised, which matters for taxes and for your actual account balance. Traders who refuse to realise losses, hoping prices recover, often turn small losses into large ones. See Disposition Effect.

Managing a long position#

1. Decide the exit before the entry. Know where you will sell if wrong, usually a level below which the reason for the trade no longer holds. See Stop Loss Strategies.
2. Size from the stop. If your stop is $3 below entry and you risk $150, buy 50 shares. See Position Sizing.
3. Plan the profit exit. A target, a trailing stop or a rule such as selling half at a target and trailing the rest. See Scaling Out and Partial Profits.
4. Watch for events. Earnings and news can gap the price past your stop overnight.

Long and the direction of the market#

Over long periods, broad stock markets have tended to rise, which favours long positions for investors. Traders still need to recognise when a market is falling or moving sideways, because buying into a downtrend is one of the most common losing patterns. Learning Market Structure Basics and Trend Structure: Higher Highs and Lower Lows helps you judge when long trades have the wind behind them.

Being long more than one thing#

If you hold several long positions in assets that move together, such as five technology stocks, your real exposure is larger than any single position suggests. A market wide drop hits them all at once. Count your total risk across correlated positions. See Portfolio Heat and Correlation Management.

Frequently asked questions#

What does it mean to be long a stock?#

It means you own the stock, or a contract that gains when it rises, and you profit if the price goes up.

What is the maximum loss on a long position?#

Without leverage, the amount you paid. With margin, futures or CFDs, losses can be larger than your initial deposit.

What is the difference between long and short?#

Long positions profit when prices rise; short positions profit when prices fall. See Long vs Short.

Sources#

• Wikipedia, Long (finance)