Course Content
What Is a Short Squeeze?
Short selling allows traders to profit off an asset’s price decline. It’s a very common way to manage downside risk, hedge existing holdings, or simply express a bearish outlook on the market. However, shorting can be an exceptionally high-risk trading strategy at times. Not only because there is no upper limit for the price of an asset, but also due to short squeezes. A short squeeze can be described as a sudden price increase. When it occurs, many short sellers get “trapped” and quickly rush to the exit to try and cover their positions. Naturally, if you’d like to understand what a short squeeze is, you’ll need to understand what shorting is first. If you’re not familiar with shorting and how it works, check out What is Shorting In the Financial Markets?. In this article, we’ll discuss what a short squeeze is, how you can prepare for it, and even profit off it in a long position.
What Is a Short Squeeze?
About Lesson
Summing up, a short squeeze happens when short sellers get trapped and are forced to cover their positions, leading to a sharp price increase. 
Short squeezes can be especially volatile in highly levered markets. When many traders and investors use high leverage, the price moves also tend to be sharper, since cascading liquidations can lead to a waterfall effect.
Make sure you understand the implications of a short squeeze before you enter a short position. Otherwise, you could end up with huge losses. If you’d like to learn more about shorting and many other trading techniques, check out A Complete Guide to Cryptocurrency Trading for Beginners.
Do you still have questions about how to short Bitcoin and cryptocurrencies? Check out our Q&A platform, Ask Academy, where the Binance community will answer your questions.