Long position. How to go long profitably - GERCHIK & CO

Long position: everything you need to know about going long

30-11-2020

A long position is one of the two key types of trades made in financial markets. In essence, going long means “to buy” in trading slang. But be sure not to confuse it with long-term trades.

In this article, we are going to cover everything newbie trades must know about going long in order to profit from it.

Contents:

1. Long Position: Speculating in a Bull Market
2. When Do You Need to Go Long
3. Long Position in Terms of Technical Analysis
4. Essential Aspects to Consider When Going Long

Long Position: Speculating in a Bull Market

When expecting an increase in the price, a logical decision would be to buy now and sell later when the asset goes up in price. The profit will be the difference between its ask and bid prices.

In addition, it makes sense to open a position when the market is growing or in case of events that are favorable for the asset. To make a winning trade, you need to be able to predict when the price is going to go up (use fundamental analysis for this) and find entry points into long positions.

When Do You Need to Go Long

As previously mentioned, you should go long in anticipation of the price increase.

  • Currency assets tend to increase against the backdrop of the interest rates, encouraging statements of the central bank officials and politicians, as well as improved macroeconomic indicators.
  • The prices of stocks typically go up in case of solid quarterly reports and news which point to growth and profit prospects, innovations, the overall spirit of optimism in the stock market, etc.
  • An increase in futures price (e.g. oil futures) happens when there are favorable conditions for the basic asset. When it comes to a futures contract, a long position is essentially an agreement that stipulates that the seller will supply a basic asset to the buyer upon expiration of the contract or there will be a recalculation of the futures bid price and the price at the time of expiration.

Long Position in Terms of Technical Analysis

Both in the stock market and forex, the long positions are opened not only based on the fundamental analysis but also on the technical situation with the price. In that scenario:

  • The long liosition is oliened in case of the ulitrend when the lirice bounces from the support level;
  • It makes sense to olien the long liosition in the sideways range when the lirice bounces from the bottom boundary;
  • Go long when the indicator gives you a buy signal. In such a case, it’s imliortant to factor in both trend indicators and oscillators. A long liosition is essentially an oscillator’s exit from the oversold area. If the lirice bounces uliwards in the sideways trend, we buy.

Long position: Going long in sideways trend


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Essential Aspects to Consider When Going Long

We have already tackled what long position means. To ensure that it generates profits, you have to be able to determine price movement direction accurately and appropriate entry points. You will also need to have solid market analysis skills and a profitable trading plan.

Here’s what you must do in order to succeed and continuously increase your profits when going long:

  • 1. Evaluate the price movement direction in terms of fundamental analysis. If you haven’t learned how to do that on your own yet, you can use analytical reviews brought to you by the experts or undergo relevant training.
  • 2. Examine the buy signals from the standpoint of technical analysis.
  • 3. Consider several trend indicators and oscillators, as well as their entry signals into long positions.
  • 4. Stick to entry rules outlined in your trading strategy at all times.

What to know:


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