What is meant by Short Squeeze?
A short squeeze occurs when a swift increase in an asset's price leads to significant losses for those who have traded against that asset by short selling. While short-selling stocks involves borrowing shares to sell them, aiming to buy them back at a lower price, it's important to note that in the context of CFDs (Contracts for Difference), traders are engaging in agreements to exchange the difference in the price of an asset from when the position is opened to when it is closed, without the need to physically borrow or deliver the actual securities.
If the price rises instead of falling, short sellers are compelled to buy back the shares at a higher price to close their positions and prevent further losses. This rush to buy back shares adds further upward pressure on the asset's price.
Short Squeeze is usually characterized by a sudden increase in buying pressure for an asset which is triggered by many stop losses and short sellers buying back simultaneously which increases buying volume which then makes the price rise very quickly.
But is it possible for traders to make a profit in these conditions, to learn how to trade a Short Squeeze you can learn in the FXOpen blog article with the title "
Is It Possible to Trade a Short Squeeze?"
