Long squeeze
Understanding Long Squeezes in Cryptocurrency Trading
Welcome to this guide on Long Squeezes! If you're new to cryptocurrency trading, you've likely heard terms that sound complicated. This guide breaks down "Long Squeezes" in a way that's easy to understand, even if you've never placed a trade before. We’ll cover what they are, how they happen, and how to potentially navigate them.
What is a Long Position?
Before we get to the “squeeze,” let’s define “long.” In trading, going “long” means you *buy* an asset (like Bitcoin or Ethereum) because you believe its price will *increase*. You profit if you’re right and the price goes up, and you lose money if it goes down. Think of it like this: you buy a collectible card for $10, hoping to sell it for $20 later. That’s going long.
What is a Short Position?
The opposite of going long is going “short.” Going “short” means you *borrow* an asset and *sell* it, hoping the price will *decrease*. You plan to buy it back later at a lower price and return it to the lender, pocketing the difference. This is riskier, as your potential losses are theoretically unlimited if the price goes up instead of down. See Short Selling for more details.
What is a Long Squeeze?
A Long Squeeze happens when the price of an asset suddenly rises, forcing traders who had bet *against* the asset (those in “short positions”) to buy it back to limit their losses. This buying pressure from short sellers further drives up the price, creating a snowball effect. It’s called a “squeeze” because short sellers are “squeezed” out of their positions.
Here's a simple example:
Imagine a cryptocurrency is
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