The stock market is a place where publicly traded companies (or just public companies) and their shareholders trade their shares. Every such company will have a symbol (i.e. AAPL, GOOG) and their shares will be traded using that symbol. Common trading rules apply to the stock market as well. Buying low and selling high ends up with profit, otherwise the trade ends up with loss. The profits do not come from nowhere, and the losses also do not go nowhere. That makes the stock market basically a place where the money goes from the pocket of people that don’t know what they are doing to the pocket of the ones that do.
The majority of the retail investors are trading emotionally and erratically. That kind of investment ends up with losses and lots of frustration. At Rudi Wealth we are trading a lot smarter than that. We are consistently following rules that are proven to work and we never let emotions take over. Our weekly newsletters on stock market investment will help you master that rules.
Long and Short Positions in Stock Market
In order to trade company shares you need to have a brokerage account. If you decide to purchase shares of a company you would submit a BUY order at your brokerage account specifying the symbol of the company and the quantity of shares to purchase. When the order is filled you will see open positions of that company at your account portfolio screen. In those cases we will say that you entered a long position. When decided, you may liquidate open positions by submitting a close order. Once the order is filled you will not see positions of that company anymore, and will end up with profit if the sell price is higher than the purchase price.
The above mentioned scenario is beneficial when you expect the price of the stock to climb. But that’s not always the case. There is also a possibility to make money when the stock price goes down. The principles stay the same: we still want to buy low and sell high, but if we don’t have the stock to sell high, we may borrow it from someone else. In those cases you will enter a short position. When the price goes down, we may buy it low and return the stock to the lender. Again, you can make money on the difference.