Long squeeze
What is a long squeeze?
A long squeeze occurs where a security's price drops suddenly. Investors who have a long position on the security rush to sell their shares to avoid a huge loss.
Where have you heard about long squeezes?
You probably haven't heard much about long squeezes. That's because they're quite rare in the market, especially compared to short squeezes – sharp rises in the price of a security that lead to short sellers covering their positions. Long squeezes are rare because when a security's value falls, value buyers come in and push the market back up.
What you need to know about long squeezes.
There's not as much pressure to sell in a long squeeze as there is to settle your position in a short squeeze – you're not legally obliged to settle anything. The reason long traders sell in a long squeeze is because they want to cut their losses before the price goes too low.
Usually, a long squeeze drives down the market price further because a disproportionate amount of traders are selling their shares. In many cases, value buyers will then restore demand and stabilise the market.
