a Short press is a concept that has become popular in the financial market recently. It indicates a situation where financial origin Like cryptocurrency and stock Suddenly the parabola goes away for no apparent reason.
In this article, we’ll look at some of the best strategies for navigating a short stress period.
What is a short squeeze?
To understand what short squeeze is, it is important to know what short selling is. a Briefly Attitude The trader is betting that the price of the asset will fall. As a result, they open a deal that aims to profit when the asset goes down.
behind the scenes, Short selling is a very complicated process.
The trader borrows shares from a broker and then sells them. In this case, they remain with cash on hand. Now, if the stock goes down, they will execute a buy trade and return the borrowed shares to the broker.
Being long and short financial origin has its differences. When you buy a stock, the maximum loss you can incur is the loss of all your money. on the other side, when you are short advantage, Your greatest potential loss is infinity Since the arrow has no limit to how high it can go.
Short stress is the period when the stock rises sharply and forces short sellers to either sell or even incur significant losses.
Related “ Bear market: what is it?
Examples of short press
The best example of a short press is that An event between Billionaires Bill Ackman and Carl Icahn. The situation happened when Ackman sued and won against Icahn. After that, Ackman took a short senior position in a company known as Herbalife. He accused her of being a pyramid scheme.
Then Carl Icahn decided to take a long position in the company, driving its stock price higher. In the end, Ackman suffered a brief squeeze and lost more than $1 billion.
Another example of short squeeze is when a company is known as AMTD surged more than 20,000% after it went public.
Other examples are companies such as Bed Bath & Beyond, AMC, and GameStop. These companies, which had a lot of interest in the short, turned into a parabola as a result, many short sellers like Melvin Capital went short.
Moreover, in the past few years, we have seen the stock of many companies rise after their bankruptcy was declared. It happened in companies like Hertz and Revlon.
While these short presses made headlines, the truth is that Very popular in the market. They are more common in cash stocks and even cryptocurrencies.
How to navigate in a short era
There are several ways to navigate a short stress position. There are two steps to take to get the most out of this situation.
identification
First, you must Work to identify these pressures. One of the best ways to do this is to use pre-market movers or Top market movers.
This is a tool that shows stocks that are making big moves. For a short squeeze, you should Determine which companies are rising.
deep analysis
Second, you must Digging deeper to identify the catalyst of stocks that are rising. You can do this by performing Google search To find out the reason for the rise of the stock. You can also make use of the Google News tab for this type of search.
Did you find any addresses? If there is no catalyst, there is a possibility that the stock will rise due to a short squeeze.
Combine the two above
If the above two solutions seem right to you, but are a bit tricky, then this is the perfect solution for you. This simple approach only requires you Subscribe to watch list It simplifies this process.
Our Watchlist at DTTW™ (via TraderTv.Live) sends you more information about stocks that are making big moves in the market.
How to trade with a short click
Short pressure trading is not easy. Still, there are many things you need to know.
Basics not required
Or not, In a short while, the fundamentals of the company do not matter. News analysis is important, but only to understand whether the sharp movement is driven by the news or not. As we said above, the short squeeze is not driven by the news.
Related “ The main risks – what to do?
As such, you should not focus too much on the fundamentals of the company such as profits and industry. Instead, you should Focus on technical and price movement Analytics.
No time to market
Second, you must Avoid market timing. Market timing is the situation you are in Predict where the stock will move in the near term.
For example, in the chart above, we see that AMTD shares have gone from about $10 to over $2,500 over a short period of time. Therefore, a trader who signs the market would place a sell trade when it goes up to $100.
You see, this trade was wrong. You should only sell the asset when you see a bearish signal from distribution in .
protect yourself. Always.
Third, in a short time, you should Always have Stop Loss and Take Profit order. These tools will stop your trades at specific places. The stop loss will stop when it reaches a certain level of loss while the take profit will stop it when it reaches a predetermined profit level.
The benefit of protecting your trades is that The graph can move in any direction during a short squeeze.
Select your trade size
fourth, Positioning is an important part trading in a short period of time. ideally, You don’t want to risk a lot of money In a highly volatile stock pressure.
As a result, make sure that the money you are risking does not expose you to significant risks.
Use more than one time frame
Finally, make a Multi time frame analysis It will help you identify key levels in a short time. This analysis involves looking at several time frames such as daily, four hour and one hour.
You can also decide to avoid the short press and stay safe.
Summary
In this article, we have outlined what short squeeze is and some of the best strategies to use when trading it. We also noticed some of the top precautions To use when setting pressure.
Useful external resources
- Banks can help consumers navigate stress – UkFinance