Steemit Crypto Academy Contest / S13W4 - Short Squeeze.

Hello Everyone.
I hope you all are fine and doing great. I am back with another crypto Academy entry and I welcome you to my post. Week 4 is all about an interesting topic which is Short Squeeze.

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What are Short Squeeze? From your own opinion.

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Short Squeeze can be defined as a term in financial markets when Price of an asset rises rapidly and the short sellers who have opened short position on that particular asset have to close their positions to avoid further losses and have to buy that asset again.

When a trader opens a short position thinking that the price of asset will dump and after little dump the price of an asset starts rising, then the trader has to close their positions to avoid any kind of extra loss and In this case, the trader has to open a long position at that time which allows the asset to rise more.

There can be many reasons for the sudden pump of asset's price and they can be any positive news about that asset, or sudden pump allowed traders to close short position and buy back again. It can also be the reason of more pump.

For simple example, Let's assume that a trader think that price of SANDUSDT will dump and they open a short position but after sometime, the price of SAND currency starts rising up.

Then, To avoid further loss, Trader has to close their short position and after closing this position, They have to buy of open a long position of SANDUSDT and When Many traders will do these steps like first opening short position and then close it to buy the currency again. It will allow the SANDUSDT price to pump further.

Short Squeeze can also be a very good opportunity for the traders who can identify this opportunity in the market. It is common in Cryptocurrency Markets as This market is very volatile with goof trading volume.

With a couple of assets (cryptocurrencies) show an example of a Short Squeeze. Screenshots are required.

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Now, Let's discuss about Short Squeeze on Crypto Charts.

Firstly, I will show you a chart of TRBUSDT and Currently, This Cryptocurrency has seen a really huge pump.

^{Image taken from TradingView}

As you can see from the above chart, TRBUSDT currency was already in Uptrend and When a little dump occured there, Many traders opened short positions and after sometime, It's price started moving up.

As a result, All the traders who opened short position have to close their positions and buy this currency which created a huge demand in the market and resulted in huge pump.

You can see from the above chart, that It is in 1day chart time frame and It was trading at 40$ and In only 2 days, It's price surges up to 80$ which is an example of Short Squeeze.

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Now, I will show you an another example of FRONTUSDT in which Short Squeeze opportunity is identified recently.

^{Image taken from TradingView}

Above image is the chart of FRONTUSDT and You can see that It's price was in consolidated zone for sometime and It's price moved a little bit down but after some down movement, We can see a huge pump in it's price when It broke the resistance level.

Traders can also identify the short squeeze opportunity here because after some down movement, It's price started moving in upward direction and as a result, We saw a huge pump in it.

This sudden pump in the price of FRONTUSDT forced the short position traders to close their positions and buy back this asset.

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Now, I will show you another Cryptocurrency which experienced a Short Squeeze is UNFIUSDT.

^{Image taken from TradingView}

Above image is the chart of UNFIUSDT and You can see that there is a sudden very huge pump in the price of UNFI and It is just sn example of Short Squeeze.

There may be many reasons of this Short Squeeze like some positive news forced it's price to move up and also forced all the traders to close their Short positions to avoid any loss and forced them to buy this asset again.

It created huge demand of UNFI currency in the market and due to closing short positions and sudden buying by many traders, It experienced Short Squeeze.

How is a Short Squeeze formed?

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Short Squeeze basically is formed in market when Traders open short positions on an particular asset but the price of that asset starts rising suddenly causing the traders to close their short positions and buy back again that asset or open long position after closing that short position.

There are some reasons for sudden pump in the price of an asset like there may be a positive news of that particular asset which resulted in the pump.

When the Trend of that particular asset is in Uptrend, then The price of that asset do not dump much. So, It can also become an opportunity for traders who can buy that asset at lower price by identifying this short Squeeze opportunity.

After the sudden increase in price of the asset, Traders who opened short position close their positions rapidly and opens long positions or buy back again that asset which results in increasing demand of that asset and hence, Price of that asset pumps.

Short Squeeze is usually formed in some currencies where the volatility and trading volume is high. Funding Rate can also be one of the important aspect to look out for Short Squeeze opportunity. When the funding rate is negative, then After some dump, the price of that asset can pump rapidly.

Advantages and disadvantages of this strategy.

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Advantages of Short Squeeze strategy are-

• Traders who can identify this opportunity in the market can buy the asset at lower price and can sell it when the price of that asset moves higher and can generate a good amount of profit.

• It can be a great opportunity for traders to make good profit after buying an asset where Short Squeeze is forming.

• It can create a good trading volume and demand in the market and can invite more traders to trade in that asset and make some profit.

• It can be benefit both the future traders and Spot traders as Future traders can make profit by opening long position by buying it at lower price and the spot traders who are holding that coin can also become profitable after sudden increase in it's price.

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Disadvantage of Short Squeeze strategy are -

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• Traders who opened their short positions and are holding their positions thinking that price will dump can incur huge losses in their trade.

• Due to Volatility in the market, Short Squeeze can occur at anytime in the market and It will result in loss of short traders.

• There is high risk involved in this trading as Market is usually very volatile and due to high volatility, Short traders can incur loss after formation of Short Squeeze.

• It can affect emotional sentiments of traders as Short Squeeze can occur suddenly in the market which can result in the revenge trading by the trader and hence, trader can incur huge loss.

Show the Short Squeeze strategy on a Steem/Usdt chart and explain.

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Our Steem Coin has also experienced Short Squeeze in past and I will show some charts of Steem/Usdt to show you an example of Short Squeeze.

Recently, Steem Price surges up to around 0.332$ from around 0.17$ on 25th October and It is an example of Short Squeeze. Below Image is the chart of Steem/Usdt.

^{Image taken from TradingView}

You can see from the above chart that the price of Steem has seen a huge pump from 0.17$ to 0.33$ and It is an example of Short Squeeze.

You can see that after slight down movement of Steem, It's Price move higher and It was also because of news at that time which was the listing of Steem currency in MEXC Future trading.

Another example of Steem currency is from the past when this currency experienced a Short Squeeze.

^{Image taken from TradingView}

You can see a huge pump in the price of STEEMUSDT and It is just an example of Short Squeeze as It forced all the traders to close their short positions and buy this asset again which resulted in the huge demand for this coin and Hence, It's Price pumped.

It's Price increased from 0.19$ to 0.30$ which was an example of Short Squeeze as Traders buy this currency again after closing their short positions and It's Price pumped up and Traders who identified this opportunity at correct time also generate good profit.

Conclusion

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I have discussed about Short Squeeze in this post and I have also given some examples of cryptocurrency charts to explain about this strategy.

Short Squeeze can really become a good opportunity if a trader identify this opportunity at correct time.

I have also given example of Steem currency which experienced Short Squeeze in past and I have also discussed about Advantages and Disadvantages of this strategy.

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That's all from my side. It was really an amazing topic for this week and I am glad to participate in this task.

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All Chart Images are taken from TradingView

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I would like to invite @malikusman1, @starrchris and @yancar to participate in this contest.

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