What does longing mean? You may have heard someone say they went long or took a long position. What does this really mean? How can you take a long position?
Let’s just imagine for a moment you wanted to speculate on Bitcoin. Looking at price action, you reason that the price of Bitcoin will be going up in value soon. In order to make a profit when Bitcoin goes up in value, you must have money invested into it. To have money invested in Bitcoin simply means to buy Bitcoin. When you buy an asset with the intent to sell it later for a profit, you have placed a long order.
You can go long on any asset that you believe might be going up in value. If you take a long position and the price of the asset goes up in value, then your long was successful. On the other hand, if the asset goes down in value, then your long position was a losing position.
When longing, you should plan for risk exposure by limiting capital per position or with something called a stop loss. A stop loss simply sells your position at a predetermined price or percentage from your entry price. Traders often use stop losses to avoid serious loss when their long trade ideas go against them.
Let’s take a look at the photographs below to visualize exactly what we just went over. (Photos provided by TradingView)
In the photo above, you have been watching Bitcoin and you notice the trend has potential for an upward movement. You don’t have a crystal ball to know for sure, but you are willing to wager some money that the price will go up soon.
Since you decided you want to try and take advantage of this potential, you look to place a long order. You are considering a stop loss to limit risk exposure.
You found a good stop loss and determined a reasonable price to sell the Bitcoin you bought. Once you determined this information, you executed the order on your exchange. Now you have bought Bitcoin with the intent to sell it later for a higher price than you paid, congratulations! You took a long position.
Taking a long position is only one way to trade cryptocurrency. There are many other ways to trade and earn with crypto that we can’t cover in a simple article. Find out more about longing and shorting at Crypto University.
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Written by Edward Gonzales © Crypto University 2022