Short Sale Restriction: Explained For Traders (2025)

Short Sale Restriction (SSR), also known as the uptick rule, is an automatically imposed SEC limitation for short sellers once a stock drops 10% or more from the previous day’s close.

Once triggered, traders can no longer short the stock on a downtick. Short sellers must wait for an uptick, meaning the trade has to execute at a price higher than the last.

SSR exists to prevent short sellers from accelerating a stock’s decline during periods of intense selling. It’s a key rule that every active short seller needs to be aware of because it directly affects execution. When SSR is in effect, short trades require more precision, patience, and strategy.

But the rule doesn’t only impact short sellers, long traders can also feel its effects through shifts in order flow, fill delays, or sudden changes in momentum.

In this article, we’ll break down what SSR is, how and when it’s triggered, and why adapting your strategy during SSR windows is essential for staying in control during volatile trading conditions.

The Short Sale Restriction is a rule imposed on Traders by the SEC, SEC Rule 201 to be exact. Their objective is to prevent short sellers from further negatively impacting the value of a stock after an initial drop of (or more).

It is designed to limit traders in their ability to short the stock in question. Short sellers can still participate in shorting, however, with a downside. The limitation implemented by the SSR is that short sellers can only sell on an uptick.

The uptick rule forces traders to take a new dimension into account and thus changes the behavior of the short seller.

In traditional short selling, the trader is looking to buy back the stock as low as possible, while in an SSR-imposed short selling, which stays in effect for the current and upcoming day, the trader might be looking for a fast covering call due to increased execution risk.

As a result, the uptick rule reduces the flexibility the short sellers used to have, forcing the short seller to wait longer for an entry, miss ideal opportunities to cover, and most importantly, the rule removes the trader’s ability to cover the position quickly, heightening the short-selling risks.

Finally, the SSR forces the trader to adjust the trading strategy as it removes flexibility and introduces a much narrower window for short selling, putting a tactical constraint on short sellers using scalping strategies that are looking for fast entries. Traders are required to adapt instantaneously and to be much more precise when executing the trades.

SSR is triggered when a stock falls 10% or more from the previous day’s closing price. For example, if a stock closes at $50, SSR activates once it hits $45 intraday.

The restriction is then enforced automatically by exchanges like NASDAQ or NYSE and remains active for the rest of that day and the entire next trading day, limiting short sales to uptick executions only.

A real-life example of SSR being triggered occurred on February 5, 2020, Tesla (TSLA) dropped over 17% intraday, triggering SSR. For the rest of that day and the entire next trading day, traders could only short TSLA on an uptick, limiting short sale execution during the selloff.

Once active, traders will notice a distinct change in how short orders are handled. Most notably, short sales can no longer be executed on a downtick. Orders must now meet the “uptick” condition, executing at a price above the last trade. This limitation can delay execution, reduce fill rates, and force traders to use limit orders or adjust their routing strategies. SSR doesn’t halt short selling, but it significantly restricts how short sellers can act during volatile sessions.

When SSR is active, short selling becomes more restrictive and timing-dependent. Traders can no longer execute shorts on a downtick, which means traders must wait for an uptick, a moment when the stock prints a price higher than the last trade, to enter a position. This constraint can create frustrating delays, especially during fast-moving selloffs when upticks are rare or short-lived.

Fill opportunities become more limited, and relying on market orders becomes riskier. Instead, traders must shift toward limit orders and carefully consider order routing strategies to increase execution efficiency. Platforms with direct market access (DMA) and smart routing can help mitigate these limitations, but the challenge remains - SSR forces a more patient and tactical approach.

In volatile conditions, the restriction can cause traders to miss ideal entry points entirely if the price continues to fall without triggering a qualifying uptick. For active short sellers, understanding and adapting to these shifts is essential to staying competitive during SSR windows.

TradeZero equips active short sellers with the tools needed to navigate SSR conditions effectively. When a stock triggers the restriction, the platform provides real-time SSR flags, clearly identifying affected tickers so traders can adjust their strategy without delay.

To counter the execution limits imposed by the uptick rule, the platform offers Direct Market Access (DMA) and smart routing technology, allowing traders to target specific exchanges and optimize fill potential, even under SSR constraints. This flexibility is crucial when upticks are scarce and every second counts.

Securing shares to short can be especially challenging during volatile sessions. TradeZero’s advanced locate tools give users a clear view of inventory and allow them to reserve borrowable shares before entry, reducing the risk of being locked out of a trade.

Traders can find 3 different locate tools, each suiting a specific need. Pre-borrows help traders minimize the risk of a buy-in, while the trader uses Locates and Single Use Locates for multiple entries for non-threshold securities, and only once shorted threshold securities, respectively.

Finally, the broker supports its users with educational resources and full transparency around how order execution behaves under SSR. By providing clarity and control, the platform ensures traders are not caught off guard and can adapt quickly when market conditions shift.

SSR doesn’t ban short selling—it simply restricts how it’s done. A common mistake is assuming shorting is no longer allowed once SSR is triggered, leading traders to abandon viable setups unnecessarily. The rule limits execution to upticks and does not eliminate the ability to short altogether.

Another pitfall is using market orders without accounting for the uptick restriction. Under SSR, market orders to short may hang or fail if no uptick is available, resulting in missed opportunities or unexpected delays. Traders need to shift toward using limit orders and smarter routing during these windows.

SSR can activate mid-session without warning, so failing to adjust your strategy in real time, whether that’s changing order types, managing expectations, or adjusting timing, can lead to poor fills or missed trades.

Finally, overtrading SSR-affected stocks without risk controls often leads to forced entries, slippage, or emotional decision-making. Recognizing when to step back, reassess, or size down is essential to staying disciplined during restricted trading conditions.

Short Sale Restriction (SSR) is a critical rule every short seller must understand. Triggered by a 10% intraday price drop, SSR shifts the mechanics of trade execution, requiring shorts to occur only on an uptick. While it doesn’t ban short selling, it imposes real-time constraints that can limit opportunity and impact timing.

Traders who adapt quickly by using limit orders, monitoring SSR flags, and securing borrows in advance maintain an edge even in restricted environments. With access to appropriate tools and execution resources, such as those offered by TradeZero, traders may be better positioned to navigate volatility and conditions triggered by rules like SSR

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