In simple terms
A long squeeze is a decline that temporarily reinforces itself when traders with long positions must sell to reduce losses, meet margin requirements, or avoid liquidation. Their exit sales add downward pressure and may force other long positions to close.
It is the mirror mechanism of a short squeeze, but the expression is informal and has no universal threshold.
How it develops
An initial fall reduces collateral value. In leveraged positions, a broker or venue may demand more funds, reduce exposure, or close the position under its rules. If many traders sell during the same interval and the book is thin, price may cross several levels quickly.
Assessing the claim requires data on leverage, open interest, liquidations, margin, volume, and market depth; the chart alone is insufficient.
Limit
Not every fast decline is a long squeeze. New information, unleveraged selling, portfolio rebalancing, or weaker demand may also drive price down. Aggregated liquidation data may not reveal every position or the reason each trade was closed.
Sources
- FINRA, Know What Triggers a Margin Call — describes margin calls and the possibility of broker sales without advance notice.
- FINRA Rule 2264, Margin Disclosure Statement — sets out risks, forced sales, and responsibility for deficits in margin accounts.
- CME Group, Futures and Options Margin Model — documents the margin system used for futures and options.