Long squeeze
Why does a falling market sometimes drop even faster, because traders holding leveraged long positions are forced to sell?
In plain words
A long squeeze is a fall that forces traders holding borrowed, or leveraged, long positions to close them by selling. Each forced sale pushes the price lower, which can push the next position past its liquidation point, so the selling feeds itself for a stretch of the move.
Why it matters
A squeeze turns a steady decline into a sharp one and can carry price well past what new information alone would justify. Volume and the size of the largest short-period moves are the traces it leaves, and the fall can reverse quickly once the forced selling is exhausted.
In a real week: ETH, week of 30 July 2018
In the week of 30 July 2018, ETH fell 12.35%, from 466.4 to 408.79. Dollar volume of 0.56 billion ran 1.1 times its prior 12-week average, and the largest single hourly move was -3.64% at 01:00 UTC on Wednesday 1 August. The week's worst day was 31 July at -5.25%, and the low of 396.61 came early on Friday 3 August. The close sat at 16.6% of the week range, in the lower third, 64.73% below the 52-week high.
A common mistake
Calling every sharp fall a squeeze. A genuine long squeeze needs leveraged long positions to be present and forced sellers to appear in the tape; the price drop alone does not prove it.