when investors are forced to buy back shares to cover their position it is referred to as a short squeeze if enough short sellers are forced to buy back shares at the same time then it can result in a surge in demand for shares and therefore an extremely sharp rise in the underlying asset s price 
the bottom linewhile it sounds illegal to sell something you don t own the market is tightly regulated when traders believe that a security s price is likely to decline in the near term they may enter a short position by selling the security first with the intention of buying it later at a lower price to set up a short position traders generally borrow shares of the security from their brokerage this means that going short requires a margin account as well as other potential permissions and possible broker fees if the price of a shorted security begins to rise rather than fall the losses can mount up quickly in fact since the price of the security has no ceiling the losses on a short position are theoretically unlimited given this inherent riskiness and the complexity of the transaction shorting securities is generally recommended only for more advanced traders and investors 