Something has been puzzling me - hope somebody can clear this up.
If price is in a down trend you would look to sell if the signs are that the trend will continue. You would wait for a rally as price retraces a little and sell then. Now here is what is puzzling me - to sell, somebody must be buying.
But who is it ? If price is obviously falling why would anybody buy ? is it people like myself and they have got it wrong. Or more position traders working on higher time frames who will just ride out the dips ?
First of all, you’re assuming that everyone in the market is a speculator of some kind. That certainly is far, far from the truth. Remember that massive amounts of volume come from folks who have to do business involving currency exchange. That’s trade flow and hedging.
As you mention, there are the traders that will buy during a downtrend. It could be difference in timeframe, like you said. Or it could be someone exiting their long. Really, there’s a huge number of possible reasons why someone would buy during a downtrend.
Think of it this way. If there were no willing buyers, would you ever be able to enter a short position with the trend?
Banks enter positions counter trend all the time because they have leveraged investments.
Inexperienced retail traders trying to pick tops/bottoms.
Or it could people people simply taking profit. If I am short to go short I had to SELL to exit my short I have to BUY. If a lot of traders decide 50 pips is enough and they all exit by buying price will go back up.