Buying Long

Buying long is the traditional way to buy stock. When you hear your grandpa talk about the stocks he bought 50 years ago, he's talking about buying long. The stock you bought last year and held was also bought long.

The basic premise behind buying long is buying stock for the purpose of holding it to make a profit when/if the price goes up in the future. If the stock price does go up, and you sell the stock, you make a profit. If the stock price goes down, you lose money. It's the same concept as buying and re-selling a tangible asset. If you bought a Mickey Mantle card in mint condition for $50 and sold it today for $400, you would make a profit of $350.

Conversely, if the price of your stock goes down, you lose money. Sticking with baseball cards for the moment, that would be equivalent to paying $200 for a card thinking the player is going places and being forced to re-sell it for $10 when his career takes a nosedive.

Example*

You buy 100 shares of ABC stock for $10 each (a total investment of $1,000).

ABC's price goes up to $15 per share.

You sell your 100 shares of ABC for $15 each (for a total of $1,500).

You make a profit of $500 ($1,500 sale price - $1,000 original investment).

*This example is simplified and does not include taxes, fees and commissions.