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A long-trade is keeping a stock for a period of time. Day-traders are not excited about long-trades. Sometimes a long-trade is a necessity due to the strong potential for a stock to keep moving up in value. Watch for how the stock is rising in value and how it has been moving upward over time. More importantly, you have to look at what the prospectus for the stock is. You should stay with a long-trade if you want to limit the losses that you could experience in the trade. You must also use this if you do not want to get into any margin deals. Working with a straightforward trade is best as it allows you to work with your own funds above all else, thus keeping you from being at a real risk of losing too much.
Future Considerations
Sometimes a stock could become even more valuable over time because the business attached to it is very strong. Trading long could be the key to making a significant profit. This comes from either a business consistently growing or from a business having a strong demand that will last for years.
Let’s take a look at Boeing (NYSE: BA) as an example. Over the years, Boeing has grown into one of the world’s most prominent manufacturers of aircraft and engines. It has also developed rockets and satellites. In 2013, the price for BA was around $80. Over time, Boeing stock has increased thanks in part to the aviation and aerospace industries trusting in Boeing for their services. The fact that Airbus is the only real competitor to Boeing has helped the company to grow. Thanks to this, BA has skyrocketed in value to around $350 per share as of February 2018. Those who traded long will have surely benefited from the gradual rise of Boeing stock.
Another good example would be Netflix. Most people associate Netflix as a place that offers movies for people to rent or stream and various original programs. Netflix has its own stock on NASDAQ under the NFLX ticker. The stock was at $130 at the start of 2017. As the company’s portfolio expanded and membership increased, the general consensus was that Netflix might be the true future of entertainment. This helped the stock to increase to $200 as 2017 ended.
What do the examples of Boeing and Netflix show? The general key is that you could make a real profit from a sale if you buy long on a stock that is progressively growing. It takes a while for it to grow, but the dramatic profits you could get from it will be worthwhile in the end.
Watch for how a business sustains its growth. There are always going to be new threats that might make it harder for an investment to stay afloat. For instance, Boeing might deal with a shortage of resources needed to keep its business afloat. Netflix might also have lots of new competitors who offer their own entertainment features. Simply put, there is never a guarantee that the dramatic risk of a stock is not going to happen.
