These terms are more efficient than terms like “buy” and “sell” because they tell your position–your mindset on a particular stock or on the industry.
- Positive on the market
- You can also be “long” on a particular stock: If you are long Nike, you’re expecting it to go up
- Negative on the market
- You can also be “short” on a particular stock: If you are short Nike, you’re expecting it to go down
- Selling with the intention to buy the shares back at a lower price
Benefits of using “Long”/”Short” vs. “Buy”/”Sell”
- If you have 1,000 shares of Nike and you tell someone you sold 500 shares, they could assume you think Nike is going to go down even though you are still positive 500 shares.
- If you think a certain stock will go down and you decide to sell all 1,000 shares and later purchase 300 shares, and you tell someone that you bought the 300 shares, it is not clear that you are still negative 700 shares. They may not understand that you think Nike will go down.
- “Long” and “short” remove the ambiguity associated with the terms “buy” and “sell.”