Recently, I’ve seen many beginners in the community asking what “gā kōng” means, so I’ve organized my years of trading experience to discuss this topic.

Honestly, shorting seems simple, but the risks are often severely underestimated by most people. Besides common pitfalls like sudden fundamental improvements or positive news, there’s a particularly damaging trap called “squeeze,” also known as “squeeze.”

Simply put, “gā kōng” is the process where short sellers are forced out of the market. When short positions accumulate to a certain level and the stock price suddenly surges, those who are short are forced to cover their positions to stop losses, which in turn pushes the price even higher, creating a vicious cycle. The end result is heavy losses for short sellers, while savvy traders who exploit this phenomenon can make a huge profit.

The most memorable example for me is the GME incident in 2021. This gaming console company was struggling, with its stock price lingering at low levels. Then Canadian entrepreneur Ryan Cohen made a large purchase and joined the board, and once the news broke, the stock started to rebound. Wall Street didn’t like it, and many institutions began shorting, with short positions reaching 140% of the float.

What happened next? The Reddit forum r/WSB exploded. Retail investors were outraged and united to buy GME shares en masse. In just two weeks, the stock skyrocketed from around $30 to $483. The short-selling institutions, due to margin calls, were forced to cover, reportedly losing over $5 billion. A week later, the price quickly fell back down, and short sellers experienced a rollercoaster ride.

Another example is Tesla (TSLA). Tesla had been losing money for a long time but was seen as the future of electric vehicles, so short interest remained high. By 2020, the company turned profitable, and the stock price nearly increased sixfold within half a year. Then, after a stock split, the price surged nearly 20 times in two years. Short sellers suffered huge losses during this rally.

So, when is “squeeze” most likely to happen? Based on my observations, several conditions need to occur simultaneously. First, the short interest ratio must be very high, with many betting on a decline. Second, the float should be relatively small, and trading volume limited, making it easier for capital to push the price. Additionally, high market attention and strong sentiment are important, and finally, positive news or deliberate market manipulation by major players can trigger a squeeze.

If you want to short, I recommend asking yourself three questions first. First, can I afford the maximum loss from this short position? Second, do I have a clear stop-loss point if the price moves against me? Third, does this stock have the conditions for a squeeze? Especially when the short interest is high, trading volume suddenly spikes, and the price breaks above key moving averages, it indicates that the odds may already be unfavorable for shorts. At this point, the smartest move is often not to hold firm but to reduce or exit the position.

My experience is that the profit potential from shorting is limited, but the losses can theoretically be unlimited. So, the key isn’t just catching every dip, but being able to safely exit when the market reverses.

How exactly to operate? If a stock’s short interest exceeds 40-50% of the float, I would advise closing the position early, even if the price is still weak. Also, watch the RSI indicator; if it drops below 20, it indicates an oversold condition, and a reversal is likely. To avoid being caught in a squeeze, it’s best to exit promptly.

If you want to join a squeeze to make a profit, you also need to monitor short interest levels. As long as short positions aren’t decreasing and continue to increase, you can keep pushing for a squeeze. But once signs of short covering appear, it’s wise to take profits early, or the rally will quickly reverse after the squeeze ends.

To avoid becoming a victim of a squeeze, I recommend prioritizing large-cap indices or blue-chip stocks when choosing assets. These assets have huge liquidity and are less likely to have excessively high short interest. Regarding tools, I generally don’t recommend borrowing stocks to short in a bear market because it’s easy to face forced buy-ins. Instead, CFDs (contracts for difference) are more flexible—they allow you to adjust leverage, go long or short, and don’t have expiration dates.

A good strategy is to buy stocks long while shorting the market to hedge risks. If your allocation is 1:1, then as long as the stock outperforms the market in gains or underperforms in losses, you can profit.

Ultimately, the reason why “squeeze” is so scary isn’t just because it can rise rapidly, but because it can cause traders to unknowingly shift from manageable risk to an asymmetric loss structure. A truly mature trader doesn’t just jump in when they see a squeeze, nor do they blindly short when they see a bearish trend. Instead, they assess whether the risk-reward ratio makes sense. If you can analyze the odds before entering a trade, “gā kōng” won’t be an unpredictable black swan but a risk that must be taken seriously during the trading process.