What are Weak Longs?
Weak longs are investors who buy a stock (known as being "long"), but who will sell it at the first sign of a price decline.
How Do Weak Longs Work?
Weak longs tend to be traders, not investors. Short-term traders typically only own a stock long enough to capture a price gain. They are not interested in holding the stock as a long-term investment.
Weak longs don't want to take a loss on their short-term investment. A weak long will typically set a tight stop-loss order that instructs his/her broker to sell an investment if it losses even a small amount of money.
Why Do Weak Longs Matter?
Weak longs piling in and out of a stock can make that stock's price very volatile. Consider: If most of the people buying a stock are weak longs, when the price declines for any reason at all, the stop-losses that the weak longs have set will be triggered, causing a rash of selling and driving the price down very quickly.