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Going Long on a Stock
Going Long on a Stock
If you’re somewhat new to the world of stock market investing, you may not be familiar with what going long on a stock means. I figured I would write a hub to address this, as this is one of those fundamental basics that you have to know to really feel comfortable with trading stocks, and it can also really come in handy if you’re attempting to impress people at cocktail parties and so forth (LOL). In the stock market, millions of shares of stock are traded every day, and for every buyer there must be a seller, and for every seller there must be a buyer. Whether you’re on the buying or selling side will mainly be determined by your personal outlook on the market, and your personal bias as far as market direction is concerned. In the world of stock market investing, there are always two opposing sides, and each side thinks that the other side is wrong. Some people are optimistic of a particular stock’s price, which means that they believe the price of the stock will go up. We call these people “bulls”. There is also another group of people (the opposing side) that think the price of a particular stock will go down. These people are known as “bears”. To further simplify it, if you believe that a stock’s price will rise, you’re taking what’s known as a “bullish” stance on the market, and if you believe that a stock’s price will fall, you’re taking what’s known as a “bearish” stance on the market. If you’ve ever been down on Wall Street in lower Manhattan, you have no doubt seen the huge statue of the bull. That’s where the whole idea for the statue came from. There are always bulls and bears in every market, for every single stock listed on all the different exchanges. I know it seems like I’m drifting off the point of what going long on a stock means, but I’m actually giving you some necessary background so that you can really grasp what it’s all about.
What Does Going Long on a Stock Mean?
So how does the phrase “going long on a stock” tie into all this? Well, just as there are two main market perspectives (bullish and bearish), and each one represents basically the exact opposite viewpoint of the other, there are also two main positions you can enter into as far as buying or selling stocks is concerned. See, whether you buy or sell a stock, any time you send your order in to a broker and ask to buy or sell a stock, you’re doing what’s known as “opening a position”. There are two main types of positions you can open when trading a stock: Long or Short. To make it really ridiculously simple, if you buy stock, you’re going long on a stock, and if you sell stock, you’re going short on a stock. Whether or not you’re going long or short on a stock will again be determined by your general sentiment about that particular stock. If you believe that the price of the stock will go up (i.e., if you’re bullish on that stock), it would be a good idea to buy the stock, because for example, if you bought XYZ stock at $10.00 per share and the price rose to $20.00 per share, you just doubled your investment. So, if you buy the stock, you have just gone long on the stock. Going long on the stock basically means that you expect the price of the stock to rise. So again, as you can see, it’s all about market perspective. One thing to note: If you have bought some stock, let’s say Google’s stock (ticker symbol: GOOG) for example, you don’t say “I’m going long on Google”—that’s a little bit off from the actual common use of the term “going long”. The better way to say it is “I’m long Google”. I know it sounds like bad grammar, but it’s the proper way to use it in stock investment slang. If you bought 100 shares of Google at $510.00, you would say “I’m long Google from $510.00”. That’s the correct, “I-sound-like-I-know-what-I’m-talking-about” investment vernacular for going long on a stock. Hopefully this hub has helped to explain what going long on a stock means; I would have to make this hub about twice as long to explain what going short on a stock is all about, so I encourage you to check out my other hub about going short and long…it’ll help clear things up a little more.