Long
A position that profits when the price rises.
Also called: go long · buy side · long position
Written by Javier Sánchez Ros
In plain language
Going long means buying with the expectation of selling higher. It is the default direction most people mean by "investing".
On a long trade the risk sits below your entry and the reward sits above it. Your stop loss belongs under the entry price, because below is the direction the trade loses.
The most you can lose on an unleveraged long is the full position value, because price cannot go below zero. The upside has no fixed ceiling.
Worked through
Long from $75.00 with a stop at $73.20
- Entry
- $75.00
- Stop, below entry
- $73.20
- Risk per share
- $1.80
- Maximum loss
- bounded at $75.00
Long means you profit as price rises, so the thing that hurts you is a fall, so the stop goes below. Stated that plainly it is obvious, and it is still the most common place a sizing calculation goes wrong — a stop entered above the entry on a long produces a negative risk per share, and whatever the calculator does with that number, it is not a position size.
The bound on the downside is worth noticing while it is here. A long position cannot lose more than it cost, because price cannot go below zero. That ceiling on the damage is the quiet structural advantage of being long, and it does not exist on the other side.
None of which makes a long safe. The floor at zero is a long way down, and a position large enough to matter will have done its damage well before reaching it. Direction decides where the stop sits; size decides what the stop costs.
Seen on a chart
Why it matters
Direction determines which side of your entry the stop belongs on. Getting this backwards is the single most common way a position size calculation goes wrong.
Common mistakes
- Placing the stop above the entry on a long, which turns the risk calculation negative.
- Assuming long is inherently safer than short. A long in a collapsing asset loses just as fast.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
A position that profits when the price falls.
The price at which you open a position.
The price at which you close a position, whether at a profit or a loss.
A predefined exit that closes a losing trade before the loss becomes serious.
The amount of an asset you buy or sell in a single trade.