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What is a Long Position?

Day trading is like learning another language and there are a ton of terms and vocab you need to become familiar with in order to become successful. One of those terms is ‘going long’ and in this post I want to go over what does ‘going long’ mean in trading.

What does going long mean in trading? We will get to that.

But first understand that going long is one of several terms in trading to learn and while knowing vocab and words is a way to start learning a language you also need to spend a lot of time learning the grammar and language structure in order to become fluent.

When learning the language of trading this means learning the fundamentals of day trading principals and financial markets. And this knowledge together with learning day trading lingo will help you to become a profitable and successful trader in the long term,

But let’s get back to the main question we are addressing in this post, ‘what does going long mean in trading?’.

What does going long mean in trading?

When traders go long, they are typically looking to hold onto their positions for an extended period. This differs from scalping or even intraday trading where traders look to get in and out of positions within a short period of time, even minutes and usually for less than a  trading day.

Going long means holding a position for weeks, months, or even years. The goal of going long is to benefit from potential capital appreciation over time as the asset’s value increases.

Going Long vs Intraday Trading

This long-term perspective contrasts with short-term trading strategies, where traders buy and sell assets within shorter time frames, such as minutes, hours, or days. Short-term traders often focus on taking advantage of price fluctuations or market trends in the near term, rather than holding onto positions for extended periods.

So, going long is all about taking a longer-term investment horizon. It’s commonly used by investors and traders who have a fundamental belief in the long-term growth potential of the assets they are investing in. 

Think of going long like planting a seed in your garden. When you plant a seed, you don’t expect it to grow into a full plant overnight. Instead, you nurture it over time with water, sunlight, and care. Similarly, going long in trading involves patience and holding onto an asset with the belief that it will grow in value over the long term.

Related Read: Day Trading Terms And Definitions

what does going long mean in trading
Think of going long like planting a seed in your garden. When you plant a seed, you don’t expect it to grow into a full plant overnight. Instead, you nurture it over time.

Going long requires patience, strategic planning, and a willingness to ride out market fluctuations with the expectation of achieving profitable returns over the long run.

What are the Benefits of Going long?

Below we look at some key advantages of adopting a long-term investment approach.

i) Capital Appreciation 

One of the primary advantages of going long is the potential for capital appreciation. By investing in assets with strong growth potential and holding onto them over extended periods, investors aim to benefit from the upward trajectory of asset prices, leading to increased wealth over time.

ii) Compound Returns 

Long-term investing harnesses the power of compounding returns. As investments generate returns, those returns are reinvested, leading to exponential growth over time. The longer the investment horizon, the more significant the impact of compounding, amplifying overall portfolio growth.

iii) Lower Transaction Costs

Compared to frequent trading or short-term strategies that involve buying and selling assets frequently, going long typically incurs lower transaction costs. By holding onto investments for longer periods, investors reduce the frequency of trades and associated fees, enhancing overall portfolio returns.

iv) Reduced Market Timing Risk 

Long-term investing mitigates the need to time the market perfectly. Rather than trying to predict short-term market fluctuations, long-term investors focus on the fundamental strength and growth potential of their investments, allowing them to ride out market volatility without succumbing to emotional decision-making.

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v) Tax Benefits 

Holding investments for the long term often comes with tax advantages. In many jurisdictions, investments held for longer periods may qualify for lower capital gains tax rates or enjoy tax-deferred growth in retirement accounts, providing a favorable tax environment for long-term investors.

vi) Focus on Fundamentals

Long-term investing encourages investors to focus on fundamental analysis, assessing factors such as company financials, industry trends, competitive advantages, and management quality. This disciplined approach helps identify quality investments with strong long-term growth potential.

vii) Psychological Benefits 

Adopting a long-term investment mindset can reduce stress and anxiety associated with short-term market fluctuations. Investors who commit to a long-term strategy are less likely to be swayed by market noise and emotions, leading to more rational decision-making.

Going Long as a Strategy

In very basic terms, when you go long you want to take a position and buy an asset or security with the belief that you will be able to sell at a higher price.

But there is a little bit more complexity to it than that when it comes to strategies for going long. And we look at the most common ‘long’ strategies in trading and investing below.

Buy and Hold Strategy

This strategy involves purchasing assets with the intention of holding them for an extended period, regardless of short-term market fluctuations. Investors using this strategy believe in the long-term growth potential of the assets they hold.

what is a long position
Here is how going long looks on the charts with several opportunities for entry into a long position identified and a target exit at a higher price.

Value Investing 

Value investors seek out undervalued assets that they believe have the potential to appreciate significantly over time. This approach often involves analyzing financial metrics, assessing intrinsic value, and identifying assets trading below their fair value.

Dividend Investing 

Dividend investing focuses on selecting assets, such as dividend-paying stocks or dividend-oriented funds, that provide regular income in the form of dividends. Investors using this strategy often prioritize stable companies with a history of consistent dividend payments.

Growth Investing 

Growth investors target assets with strong growth prospects, such as high-growth companies in expanding industries or sectors. These investors are willing to accept higher levels of volatility in exchange for the potential for substantial capital appreciation over the long term.

The Mindset Required to ‘Go Long’

The psychology of going long involves understanding the emotional and psychological aspects of holding onto investments for the long term. Successful long-term investing requires not only financial knowledge but also emotional discipline and resilience.

Be Wary of Fear

Fear can manifest when investors are uncertain about market conditions, economic trends, or the performance of their investments. It may lead to impulsive decisions such as selling assets prematurely during market downturns out of fear of further losses.

what does going long mean in trading
In very basic terms, when you go long you want to take a position and buy an asset or security with the belief that you will be able to sell at a higher price.

Don’t Get Greedy

Greed can arise when investors become overly optimistic about potential gains and ignore risks or overleverage their positions. This can lead to chasing speculative investments or taking on excessive risk, which may backfire in volatile market conditions.

Be Patient!

Impatience can lead investors to seek quick profits or expect rapid price appreciation, causing them to overlook the benefits of long-term compounding and the time required for investments to realize their full potential.

Analysis Over Emotion

Understanding market dynamics, investment principles, and historical market trends can help alleviate fear and uncertainty. Educated investors are better equipped to make informed decisions based on facts and analysis rather than emotions.

Clear Goal Setting

Setting clear, realistic investment goals and timelines can help manage expectations and reduce impulsive actions driven by greed or impatience. Long-term investors focus on achieving sustainable growth over time rather than short-term fluctuations.

Stick to the Plan!

Having a well-defined investment plan with predetermined entry and exit points, risk management strategies, and asset allocation guidelines can instill discipline and prevent emotional decision-making during market fluctuations.

What does going long mean in trading? Final thoughts

Going long in trading speak is a term that is fairly simple to understand and it is one of many you need to become familiar with. And this post has aimed to give you a comprehensive answer regarding the meaning of going long in trading.

We have also discussed the benefits of a long strategy for investing and also different types of long investing strategies you could adopt.

And finally we discussed the mindset required to take a long approach to investing which is one of patience, planning and research to name just a few mindset tips.

For beginner, and even intermediate investors, taking a long position will most likely be the only trades you will be taking.

Going long simply means you want whatever security/shares you buy to go up in price.

How to Start

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