The world of trading can be very complex because the financial markets are complex. There are thousands and thousands of successful traders out there today. The amazing thing is that they all have their own niches carved and approach the market in a unique way. This would be great news for novice traders, because it shows that there are thousands and thousands of different ways to get a good in the markets. It's just a matter of discipline and find the approach that suits your style and personality. With all that being said, new traders start somewhere, so let's look at some basic concepts and approaches to the markets.
Going Long - This means that you bet on the instrument (stock, future, option, etc) to go up and you want to buy. You buy the financial instrument, watch rise and then sell it for a profit. Profits are realized when you buy low and sell high. It is also known as taking a long position.
Going Short - This means that you are betting on the instrument to go down and you want to sell or take a "short position". A short position is performed by buying those shares or "that" closed your position. This concept is very confusing for new traders because you have something that you do not even have to sell yourself. The thing is that you're still trying to buy low and sell high, you're just selling high and buying low first later. Think of it this way - you go to a car dealer and buy a new car, it charges you $ 20k and then looks to buy it for a lower price. This dealer has a "short position" on the transaction between you and taken him. We do not recommend new traders to take short positions until they know more about the market.
One thing to keep short and long positions in mind is that they are totally different in nature. There are far more traders out there to take over those short long positions. Human nature tells us that we buy with the expectation of rising prices. The concept of wanting prices fall is against human nature and short positions may be more erratic due.
Chuck Cox is a technical writer and Industrial Scientist by professional with a background in statistics. He used mathematical and statistical methods to invest and trade in the stock, futures and options markets. Chuck has several companies owned and currently operates several websites. To investigate, visit his website, Stock Trading Reviews a new stock trading idea
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