Stock Market Terminology
Stock Market For Beginners:
Stock Market Terminology: What is a long?
Let’s revisit our Picasso paintings example in order to explain stock market terminology and the definition of a long in the stock market.
Imagine that you had a crystal ball and this magical ball predicted Picasso’s raging success.
Yes, the same artist that you met at the flee market just last weekend, is going to be a world renowned artist.
Saturday comes around and you immediately rush to the flee market and ask the currently unknown Picasso, how many paintings you can obtain from him in the next few weeks.
He agrees to work night and day to produce 100 quality pieces. You are thrilled at the news and confirm the price of each painting at $20.
Your insider trading secrets, tips and information mean that you anticipate that if all goes according to plan,
Picasso’s work will become more valuable with time.
As a day trader, you could share this stock market terminology and information with a local newspaper, and with publicity, you can host a dinner party and sell your current holdings of Picasso’s paintings or $40 per painting. You’ve made a $20 profit from your trade.
A swing trader would expect the price of the paintings to increase a lot more than $20 over the next couple of weeks because the word on Picasso’s talent begins to spread.
Holding onto the artwork for 3-8 weeks sees the price of the Picasso painting rise to $250 per painting. Instead of a quick $20 profit, the swing trader’s patience has yielded a $230 profit.
An investor or long term trader sees even more potential price increase of the Picasso painting,
and holds on to the paintings for 9 months.
By this time, there is media frenzy; Picasso is taking a sabbatical to celebrate his success.
The prices of his paintings increase as the paintings are no longer available at a swap meet and retailing at selected galleries for $1500. Again patience and tolerance for price fluctuations has yielded the long term trader a hefty return of $1480.
When you decide to go “long” a stock or to buy a stock, you expect that the stock will rise in price and you
will be able to sell it at a higher price, making a profit from the difference between your original purchase price and the sale price.
Whether you’re a day trader, swing trader or long term trader, a long will be the same, the rules that you use to make a decision to purchase a
stock are what differ for each style of trading.
Stock Market for Beginners : Stock Market Tutorial
How
to Invest in Stocks : Daily Tips and Learning
The goal of this website is to bridge the gap between the learning and the stock trading experience.
To make that gap easier to bridge for all who participate in stock market for beginners,
we advise for all new traders to acquire the Basics of
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