40 Things To Know Before Entering The Stock Market

27. Long Short Strategy

In a long-short strategy, an investor chooses several equities and ranks them according to their combined return power. Investors take long positions in stocks that will most likely appreciate. Then they short positions in stocks on the decline. With this strategy, investors aim to minimize market exposure due to volatility.

Investors use this method to profit from long stock gains as well as short price declines. Most of the time, the long-short strategy earns a profit. This type of approach is most popular with hedge funds. Hedge funds tend to use a market-neutral plan that has both long and short positions.