Yesterday I saw another crash like those that leave you wondering what happened. It turns out it was a brutal long squeeze. And the truth is these events are more common than you think, so let’s better understand how they work.

Look, there are two sides to the coin here. A short squeeze is when many traders are betting that the price will go down, but suddenly it rises and forces them to close positions. When they start buying to cover their shorts, they create a chain reaction that pushes the price even higher. You see it in seconds, the chart goes crazy upward.

But a long squeeze is the opposite and probably more dangerous. Too many people are long expecting profits, the price drops suddenly, and everyone panics. When they close their positions simultaneously, they add more selling pressure. The long squeeze turns into a cascade of liquidations that leaves you watching the chart fall in real time.

What’s interesting is that both squeezes are predictable if you know what to look for. First, check the open interest. If you see too many long or short positions accumulated, and funding rates are skewed in one direction, it’s a warning sign. Second, when volume suddenly explodes in the opposite direction of the trend, something is happening. And third, if the price breaks supports or resistances violently and without news, it’s probably a squeeze.

Here comes the advice I learned the hard way: don’t chase the big candles. Those who enter late into a long squeeze or short squeeze end up getting punished. The smart move is to observe how pressure builds up in the market, wait for things to calm down, and then operate the rebound when the chaos subsides. It’s more boring, but much more profitable than trying to surf the explosive wave.