What Is A Long Squeeze?

• A long squeeze occurs when an asset’s price falls more than expected.
• When prices drop, buyers are often ‘squeezed’ out of their positions to limit any future losses.
• Equities, oil, and cryptocurrency markets have experienced prolonged squeezes.

Market squeezes occur when a security’s price changes sharply, forcing traders out of their positions. While retail traders are more familiar with short squeezes, it is not the only type of squeeze.

These events are common across equities, commodities, crypto, and forex markets and often mark sharp trend reversals.

What Is The Meaning Of Long Squeeze

A long squeeze occurs when an asset’s price falls more than expected. When prices drop, buyers are often ‘squeezed’ out of their positions to limit any future losses.

As prices fall, stop-losses are triggered, margin calls rise, and leveraged positions are liquidated. This forced selling adds to downward pressure. According to IG analysts, the squeeze adds to the downward momentum as the balance between buyers and sellers shifts, potentially leading the bull market to reverse into a bear market.

Investors holding leveraged positions are at higher risk during a long squeeze, as leveraged trading amplifies both profits and losses.

When the float is small, the share price is influenced by a relatively small group of participants, making the stock more sensitive to shifts in supply and demand. In a tight market, even a mild spike in selling could affect prices much harder than usual.

How Long Squeezes Form in the Market

Long squeezes tend to develop under a combination of factors:

• Overcrowded long positioning, where too many traders are on the same side of the trade
• High leverage, increasing sensitivity to price swings. 
• Thin liquidity or small float, where a limited supply magnifies selling pressure.
• Negative catalysts, such as earnings misses, macro shocks, or policy changes.

Long Squeeze versus Short Squeeze

The key difference between a long squeeze and a short squeeze is in the directions of price movement and who is being affected within the market:

Long Squeeze

• Triggered by sharp price declines
• Long holders sell to cut losses or meet margin calls
• Selling accelerates, deepening the downturn
• Often follows an overstretched rally or crowded bullish trade

Short Squeeze

• Triggered by rapid price increase
• Short sellers are forced to buy back shares to limit losses
• Buying pressure pushes prices even higher
• Often fueled by high short interest and limited float

In essence, a short squeeze is characterized by forced buying, while a long squeeze involves forced selling. Both processes create feedback loops that amplify price fluctuations, operating in contrasting directions.

Example Of A Long Squeeze In Commodities

Long squeezes are not limited to equities. Commodity markets have also seen dramatic examples.

Between April 9 and April 21, 2020, the WTI crude benchmark’s price dropped by about 46% suddenly, triggering a long squeeze. While the price rose slightly over the following days, on April 26, a 22% drop forced buyers to exit their positions to cover losses.

The squeeze came amid a rise in crude supply and concerns about elevated levels at oil storage facilities driven by the COVID-19 pandemic.

Long Squeeze In Crypto

Cryptocurrency markets are particularly prone to long squeezes due to:

• High leverage availability
• 24/7 trading
• Thin liquidity during off-peak hours
• Fast-moving sentiment shifts

During sharp crypto downturns, large volumes of leveraged long positions are often liquidated within a short time. In recent years, major market drawdowns have triggered billions of dollars in forced liquidations, pushing traders toward more conservative, risk-managed strategies rather than aggressive trend chasing.

In October 2025, the cryptocurrency markets experienced the largest liquidation event in history after President Donald Trump threatened “massive” tariffs in response to Beijing’s rare-earth export curbs. Between October 10 and October 11, nearly $20 billion in leveraged trading positions were liquidated, affecting 1.6 million traders.

Long Squeeze in Forex

Long squeezes also occur in currency markets, particularly when positioning becomes crowded.

In forex, a long squeeze typically happens when unexpected macro developments, such as economic data surprises, central bank policy shifts, or geopolitical events, reverse sentiment on a previously favored currency.

Reuters and other market observers frequently describe these episodes as positioning-driven squeezes, in which the speed of the move is driven more by forced exits than by a gradual fundamental reassessment.

For example, "squeeze of the market long USD positioning" drives rapid moves in currency pairs. In simple terms, this reflects a similar dynamic where price reversals force long positions to adjust.

To sum it up, long squeezes matter to investors because they help them recognize when price action is driven by positioning rather than fundamentals and to leverage effectively. 

Also See: Cyber Monday: How The Biggest Event In Online Shopping In The US Came Around

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