What Are Weak Longs?

Weak longs are investors who hold a long position and are quick to exit that position at the first sign of weakness. This type of investor is typically trying to capture the upside potential of a security but without significant loss. These investors will quickly close 🔜their position꧅s when a trade does not move in their favor.

Understanding Weak Longs

Weak longs are often short-term traders rather than long-term 澳洲幸运5开奖号码历史查询:investors because they are unwilling to hold their positions through market fluctuations. If a trade does not move in their favor, they will quickly close their positions and look elsewhere for opportunities. Most weak longs are momentum traders who are more interested in a quick profit than investing in 澳洲幸运5开奖号码历史查询:undervalued companies until they reach a fair value.

When weak longs close their position, it may present an opportunity for other investors to 澳洲幸运5开奖号码历史查询:buy into the dip. The selling pressure that weak longs create when closing their positions can lead to consolidation in a stock after a significant uptrend. This explains why stocks tend to top out after following an earnings announcem💧ent because these traders lock in their profits and move on to other investment opportunities.

The benefit of a weak long is that the investor can secure profits immediately rather than succumbing to the 澳洲幸运5开奖号码历史查询:disposition effect, holding onto a l🌳osing stock for too long. However, weak longs tend to generate substan🌱tial churn in their portfolio, making it harder to remain profitable such as through the use of a long-term investing strategy.

Example of Weak Longs

When a company announces favorable earnings for the quarter, short-term traders may buy the stock at the open to capitalize on the run-up while long-term investors may add the stock to their existing positions. Weak longs will hold the stock until it begins to 澳洲幸运5开奖号码历史查询:consolidate following an earnings run𒁃-up, selling the stoc꧃k and moving on to other opportunities. Long-term investors will continue holding the stock.

Long-term investors may take advantage of the consolidation to add to their position and lower their cost basis. Long-term investors may wait on the sidelines following a positive earnings announcement and buy the stock after it begins to move lower and consolidate. This allows them to buy the stock at a lower price and ultimately increase their long-term profit potential.