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Long Position in Stock Market – Long Position vs Short Position

Long Position in Stock Market - What is long position and short position?

Wondering what should I write for my Profitsolo community after a long gap. I’m so sorry my friends I could not bring any topic to the platform due to my busy schedule. However, I will try my best to get at least two articles per week that is my promise to keep you upgraded with personal finance knowledge.
Along the same lines, I thought of discussing with you all “Long Position in the Stock Market“.

In other words, I will try to cover” What are long position and short position?”. This would definitely help in making the right investment decision as per the horizon.

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What is a Long Position in Stock Market?

To begin with, let’s break down Long Position into two words to understand its context in the stock market. Long refers to the time horizon of the investment whereas the position stands for the stance who takes for the investment. If we combine the meaning of both terms it would mean what attitude you hold toward an investment. Here this investment could mean stocks you buy or sell in the share market.

Alternatively, a long position in the stock market means you hold a stock with an expectation that its value will increase in the future, and generally these long positions are being taken by retail investors with a view to creating wealth. It signals bullish intent towards investment i.e. an asset, stock, security, or bond. A long position refers to the purchase of an asset with the expectation that its value will rise and represent a bullish attitude.

Hoping you guys have understood the meaning of a long position in the stock market. Let’s understand its relevance with an example. Mr. A buys stocks of a company XYZ which is trading for Rs. 1000 with an expectation to raise its price 5 times in the next 10 years. As 10 years is a long period hence it will be referred to as holding a long position. It will hold its relevance true only if you have invested your money after conducting proper research based on the fundamental & technical analysis.

Mostly we have seen people buying falling stocks and selling when they are high. But it’s not always right to do so ensure before making any investment you do thorough research about the stock. Don’t follow your peer or friend’s strategy while buying a stock as their investment goals will be different depending on their needs & choices.

Long Position vs Short Position

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Now we know what is long position so opposite to it is a short position. It becomes very easy to relate similar terms because of their relevance and usage. If we try to put the short position in words it will be having a bearish attitude towards its future hence you sell them even before they get transferred to your Demat account. Basically, when an investor holds a short position means they borrow the stocks on margin & sell them on the same day.

Let’s understand the key differences between both the positions:

Long PositionShort Position
Buying stocks/assets with a long investment horizon.Buying stocks/assets with a short investment horizon probably selling the stocks on the same day.
It’s more suitable for retail investors.It’s suitable for a trader who looks to book quick profits due to stock movement.
Investors hold a bullish attitude toward investment with the expectation of rising in security prices.Traders have a bearish attitude toward security by making quick profits with the hope of dropping prices.
It spares the investors from constant market watching.It requires the timing of the market on daily basis to study the stock movement.
A long position in weathering the inevitable markets up & down.The short position doesn’t offer this benefit.

There are numerous long and short positions that traders can take. Before attempting to incorporate long and short positions into his or her trading strategy, a knowledgeable investor will have grasped the numerous advantages and disadvantages of each individual type of long and short position.

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