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Trading 101: What is a "Short Squeeze"? - YouTube
Channel: ClayTrader
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what is a short squeeze if you're just
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getting started and new to the stock
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market maybe you've heard of short
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squeezes in fact up on the screen right
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now I'll put a headline where it shows
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how Tesla shorts have lost well a lot of
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money as you see there so but what
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exactly is going on what's causing this
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short squeeze how does a short squeeze
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actually work to best explain this we've
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got to set some ground frames here some
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grant not ground frames some foundations
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here that will help us kind of launch
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from what's going on so and I'm not
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trying to solve to anybody's
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intelligence but like I said we need to
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start with just some basics here so that
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you can understand all the dynamics that
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come together for almost a perfect storm
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that caused this short squeeze so in the
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market we have people known as buyers
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right and these people they want to buy
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a stock so for example we'll just use
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Tesla they want to buy Tesla so that's
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the foundation yes there's buyers in the
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market and when a lot of people buy a
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stock well it causes it to go up okay
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so that's just foundation lots of buyers
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in the market when people buy stocks
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will go up and then there's another
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group of people out there that they say
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you know will let me take a step back
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why would people buy well people buy
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because they think a stock is gonna go
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up people buy because they think Tesla
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is going to go up but there's another
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group of people out there so right here
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we'll put buyers buy because they think
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that the price is gonna go up
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represented there by the green arrow you
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have another group of people out there
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that are known as the shorts now the
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shorts believe this they believe the
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price is gonna go down now part of
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shorting and how you can make money on
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shorts in fact you're like wait what
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make money when prices go down what are
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you even talking about well I've never
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even heard of the word shorts before I'd
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encourage you to hit the pause button
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here and I'll put a link down below to a
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video where you know I talked more about
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and I'll also actually put in a link to
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a video below where I short a stock and
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although it wasn't intended when I did
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the live recording it was kind of almost
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like a sword squeeze in a sense but it
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wasn't really one but it kind of felt
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like one as you'll see when you go to
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that video so I'll put those links down
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below but if you're like no no okay I
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know what shorten is and I know what is
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you know I know that you can make money
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when prices go down but I'm still not
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quite your honest short squeeze perfect
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that's through this video is intended
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for blank said shorts are thinking well
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the price is going to go down and you
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can make money on that
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but the key with that is shorts actually
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sell first and then when they're ready
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to exit the position you know get out of
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the position they need to buy so what's
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going on is when shorts enter into the
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trade what happens in that situation
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well they automatically become buyers
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how so again I'll reiterate my short
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sells first but then in order for them
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to make money in order for them to exit
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out of the trade they need to buy so you
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have shorts that turn themselves into
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buyers now at some point you know not
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right away but at some point they're
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gonna have to buy so what does that
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actually do that creates what more
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buyers out there now let's go over to
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Tesla for example and we have Tesla
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stock here and the stock price starts to
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go up now for shorts they make money
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when prices go down so the flip side of
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that will okay how do they lose money
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well prices go up so when prices start
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to go up the shorts they start to feel
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nervous oh I'm losing money right now
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I'm losing money but who else likes to
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see when prices go up
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well buyers do right because buyers are
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thinking oh wow that stocks going up a
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lot of Tesla's going up you know I would
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like to make money
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I should probably buy so they see any
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bean buyers normal people seeing the
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price going up well what do they want to
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do well they're gonna buy so what is
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that do well
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now we have more people entering the
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equation right
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you have just the normal buyers people
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that think I want to make money because
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I think Tesla is going to go up even
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higher so think about it well now we
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have more people buying because they
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think the price is gonna go up so well
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yeah the price goes up even more so what
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happens to the shorts Oh whole man now
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I'm losing that much more money now I'm
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losing that much oh this is this is not
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good this does not feel good the price
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keeps going up but what's happening from
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this people's perspective oh wow
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Tesla is still going up wow I can't
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believe my buddy
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he bought a while ago and he's making
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money now know what I should probably
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just buy oh okay so now we have even
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more buyers that showed up more buyers
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well when more buyers show up what's
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that going to do to the price well
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that's gonna send the price even higher
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and now all of a sudden we have a
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situation where the shorts are like okay
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well I I have to sell and I'm not gonna
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get into margin calls there's other
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videos on that but basically a margin
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call is where your broker says hey you
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were way wrong this loss is getting out
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of control
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you need to exit the position exit the
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position do you remember from the begin
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of the video how does a short exit the
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position well they have to what they
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have to buy so now the shorts need to
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start to exit the position in other
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words they need to buy which does what
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well now you have all these
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short-sighted people that went short
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they are now having to join all the
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buyers to buy now you have even more
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people buying and keep in mind this went
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up again so you have the normal buyer
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saying oh wow you know Jimmy and Billy
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and Robert they all bought and now
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they're making money on Tesla I should
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probably buy so you have that dynamic
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still going on which is again adding
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even more
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so you have even more buyers going on
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and Tesla's going up at that point you
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see what's going on here
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holy smokes there's even more shorts
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that are saying I got to get out of this
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thing I am getting squeezed everything
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is lining up against me you have normal
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buyers you have other shorts trying to
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exit the trade which is buying so then I
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got to get out now so now all of a
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sudden you have even more buyers showing
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up and these strip buyers are just part
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of the shorts and then of course from
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this point of view the normal people are
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like I can't believe Tesla still going
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up
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Billy Robert John Susie Sally they all
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Barrow making money cuz they bought a
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long time ago I better buy so now
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they're buying and there's even more
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buyers coming into the equation so what
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is that going to do to Tesla even more
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and then this process repeats itself
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over and over and over again the shorts
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aren't just simply fueling the already
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hyped up fire that in this situation
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Tesla was and that's why they make the
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comment wild shorts got roasted shorts
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got squeezed because the squeezing part
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is in the sense of they got to exit the
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trade but they're trying to exit in an
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environment where there's all sorts of
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people buying because not only are there
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other shorts buying you have just the
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normal people out there buying because
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they just think that they're gonna make
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money when the prices go up so it's
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almost a self-fulfilling prophecy if you
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will of just momentum that's going
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against everybody because you have so
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many buyers involved and this is why and
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it's kind of a sign open when people are
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like well shorting this evil you know
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shorts that that shouldn't be allowed
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well know why not shorten definitely
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should be allowed why because if a
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company does its job if a company can
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prove its value then all the short is
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doing is helping the stock in this
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manner because a short
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automatically becomes a guaranteed buyer
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and then like I said if the company does
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its job and it's not a piece of garbage
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well then eventually those shorts are
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gonna have to buy and when you get the
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right recipe in place you can get a
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short squeeze and this is how it all
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works so my question to you down in the
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comment section
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do you remember Tesla when this was all
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going on that headline I showed did you
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did you trade it at all I mean I was
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part of it not luckily I was not one of
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the ones getting squeezed
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I was just trading generally but it was
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a crazy crazy time and you know short
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squeezes they don't that'll happen all
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the time but when they happen they can
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happen big and you can get some very
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explosive movements but maybe were you
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part of Tesla or another question
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they've ever been a part of any other
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short squeezes let me know it on the
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comment section down below if you
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enjoyed the video please hit that like
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button and let me know if you want me to
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keep making these by leg set hitting
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that like button or just let me know
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down in the comment section and also
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hope you decide to check out the rest of
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the channel lots of content there's live
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train videos all sorts of stuff so check
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that out and hopefully you decide you
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know that's worthwhile enough I'm gonna
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hit the subscribe button because I'd
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love to have you as part of the channel
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so thank you for hanging out hit that
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like button and I'll see you back to the
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next video first off thanks so much for
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watching the entire video real quick
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before you go I want to invite you to a
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live webinar web class training workshop
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online event whatever you want to call
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it but it will be me live revealing to
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you what I discovered that has allowed
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me to transform myself from being an
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employee to being my own boss
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including how I had only one losing day
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out of 73 days in total I'm going to
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cover three keys that have helped me
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unlock profitable consistency within the
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markets the first key is super weird but
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in a productive type of way the second
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key is super awesome because it quite
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literally is wired into our DNA as
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humans making it very easy to use but in
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a cruel way this becomes a pitfall for
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many traders I'll explain it all though
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including how to avoid the pitfall that
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it creates for some and yeah the third
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key when you hear it sounds way to get
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way too good to be true but it's not and
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I'll show you how it all works then at
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the end I open it up for a
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question-and-answer session that is
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again totally live even if you can't
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make the live session please still sign
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up as it will be recorded and you can go
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back and watch the replay that I will
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send you
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click the image on the screen or click
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the link down in the description box so
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you can get the date and time and claim
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your spot which I should know is limited
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due to the fact that this truly is a
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live event if you have any questions let
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me know if not I'll be seeing you soon
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