Going long
Family VII · Market & styles
Not to be confused with long position, going short.
Going long is the act of buying a financial instrument to open a position that benefits from a price increase. It is the opposite of going short, where the trader sells an instrument they do not own in order to profit from a decline. The term applies across asset classes, including shares, futures, currencies, and commodities.
How a long trade works
When a trader goes long, they buy the instrument at the prevailing market price, known as the entry price. The position is closed by selling the same quantity at a later time. Profit or loss is the difference between the sale price and the purchase price, multiplied by the number of units, less any commissions, financing charges, or spreads.
In a cash market, the buyer must pay the full purchase price. In a derivative or margin market, only a fraction of the notional value is required as margin, which magnifies both gains and losses. The exact margin requirement varies by broker, instrument, and regulator.
Worked example
A trader goes long 100 shares of a company at $50 per share.
If the exit price had been $45, the result would be a $500 loss instead. Commissions and taxes are not included in this simplified example.
Long positions in different markets
Going long is not limited to buying shares outright. It can also mean:
- Buying a currency pair in the forex market, which profits if the base currency strengthens against the quote currency.
- Entering a long futures contract, agreeing to buy an asset at a set price on a future date.
- Purchasing a call option, which gives the right but not the obligation to buy at a specified strike price.
In each case, the trader benefits from a rise in the underlying price, but the mechanics of margin, settlement, and expiry differ.
Often confused with
- long position
- A long position is the state of holding an asset after a purchase, whereas going long is the action of opening that position; the visible sign is that a long position appears on a holdings statement, while going long appears on a trade confirmation.
- going short
- Going short is the opposite action, selling borrowed assets to profit from a price decline, while going long is buying assets to profit from a price rise; the visible sign is that a short trade is marked as a sale, whereas a long trade is marked as a purchase.