A short squeeze is a big risk associated with short selling. If the price starts to rise rapidly, the trend may continue to escalate because the short sellers will likely want out Two measures useful in identifying the commodity at risk of a short squeeze are (a) short interest and (b) short-interest ratio. Short interest refers to the total number of shares sold short as a percentage of total shares outstanding, while short-interest ratio (SIR) is the total number of bitcoins
sold short divided by the bitcoin’s average daily trading volume
Keep in mind that when a short position gets closed it actually creates a buy order.
After a prolonged period of moving within the range, stop losses start to pile up. And so, even a small movement in the market can trigger a chain reaction of stop losses all at once and lead to a breakout on the charts, which we’ll get to below.