Short selling is a strategy where a trader borrows shares and sells them immediately, aiming to buy them back later at a lower price and pocket the difference — a bet that a stock will fall rather than rise.
A long position's maximum loss is capped at the amount invested — a stock can only fall to zero. A short position’s maximum loss is theoretically unlimited, because the further a stock rises after being shorted, the more it costs to buy back the borrowed shares. This asymmetry is why short-selling is generally considered a higher-risk, more advanced strategy than buying stock outright.
A short squeeze happens when a heavily-shorted stock's price rises sharply, forcing short sellers to buy back shares to limit further losses — that forced buying itself pushes the price up further, which can force more short sellers to cover, creating a rapid, self-reinforcing spiral.
A long position's maximum loss is capped at the amount invested; a short position's potential loss is theoretically unlimited, because a stock's price has no upper bound.
A short squeeze is a rapid price spike that forces short sellers to buy back shares to limit losses, and that forced buying itself pushes the price up further, sometimes triggering more forced covering.
Not necessarily on its own — it can reflect genuine bearish consensus or elevated squeeze risk, depending on context, which is why it is tracked as a sentiment input rather than a standalone trade signal.
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Educational research only — not investment advice.