Recently, I saw discussions in the community about squeeze行情, which reminded me that this is indeed the most likely place for short positions to get wrecked.

Squeeze, in simple terms, is the process where the bears are forced out of the market. It’s not just a straightforward stock price increase, but rather because too many people are shorting, once the price starts to reverse, these short positions are forced to cover, buying pressure floods in, and the stock price accelerates upward, creating a vicious cycle. I’ve seen too many people lose big here.

Squeeze usually falls into two types. One is when the stock price rebounds too quickly, forcing shorts to buy back at high prices to close their positions. The other, more ruthless type—some capital entities deliberately hype up the stock price to squeeze out shorts and profit from it. The GME incident is a classic example: from single digits in early 2021 to 483 yuan, with shorts losing over 5 billion USD at that time. TSLA is another: from 350 to over 2000, a 20-fold increase in just two years, with many shorts being squeezed to death.

Why does a squeeze happen? Usually, several conditions are met simultaneously: a very high short ratio (many betting on decline), limited circulating shares, low trading volume, and sudden positive news or main capital inflows. When these conditions come together, it’s especially easy to trigger a squeeze行情.

If you want to short, my advice is to ask yourself three questions first: Can you control the maximum loss of this short? Is there a clear stop-loss if the price reverses? Does this stock have the conditions for a squeeze? Pay particular attention to changes in short ratio and trading volume. When shorts exceed 40-50% of circulating shares, the risk is already very high.

The key is to look at the odds. Don’t ask “Will this stock fall?” but rather “Is the current shorting risk reasonable?” If the short position is too large and the price starts to break above key moving averages, the best approach is often not to hold on stubbornly but to reduce or exit. When the odds of loss worsen, it’s usually not a matter of “waiting it out,” but becoming more dangerous the longer you drag.

To avoid a squeeze, stock selection is very important. Major indices or blue-chip stocks are relatively safer because these assets have huge liquidity and are less likely to have excessively high short positions. As for tools, in a bear market, borrowing stocks to short can face forced buy-ins, so using spread contracts (like options or futures) is more flexible—they allow you to adjust leverage, operate both long and short, and have no expiration date.

The biggest challenge with shorting is: limited profit potential but theoretically unlimited losses. So, when facing squeeze risks, the key isn’t whether you can profit from every decline, but whether you can safely exit when the market reverses. Truly mature traders don’t just rush in when they see a squeeze, nor do they short just because there are bears. Instead, they first assess whether the odds of the trade are reasonable. As long as you can evaluate the odds before entering, a squeeze won’t be an unpredictable black swan but a risk that must be taken seriously during trading.