I’m a new stock investor. I came across a website that explains their services as: "The purpose of our ‘Swing Trades’ is to give short term stock investors a list of stocks for swing trading that have a profit potential, Long or Short over a period of one week." What does the long and short mean in relation to this sentence? Please explain how you use these in trading relating to how they used it in their sentence. Your help is greatly appreciated! Thanks!
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"Long" means that you are buying the stock, anticipating that it will go up. "Short" means that you are borrowing the stock from your broker (you will need a margin account to do this), expecting that it will fall in value. If that happens, you then buy the stock and give the shares to your broker at a lower price than you paid, making money on the decline in the stock price. Be careful going short — since there is no limit to how high a stock can rise, you could be on the hook for much more than you invested.
Profit potential for Long or Short positions.
When you take a long position in a stock you are buying shares in the company expecting the value of the stock to go up. You then sell the stock when the stock price indicates the upward trend is over.
When you take a short position in a stock you are expecting the value of the stock to go down. You cover the shorted shares when the stock price indicates the down ward trend is over.