I was not able to get a decent response to my question on the Rookie Forum so I'm posting here:
This is from FXCM SSI Primer:
"Forex trading crowds tend to fade momentum. Most often we see the majority of traders sell into rallies and buy into declines. During trending market conditions, this means that we use the SSI as a purely contrarian indicator. If the majority of traders are short, then we would expect price to continue rallying."
I get the contrarian issue but can someone please explain why most traders are selling into rallies and buying in declines?
Thanks.
This is from FXCM SSI Primer:
"Forex trading crowds tend to fade momentum. Most often we see the majority of traders sell into rallies and buy into declines. During trending market conditions, this means that we use the SSI as a purely contrarian indicator. If the majority of traders are short, then we would expect price to continue rallying."
I get the contrarian issue but can someone please explain why most traders are selling into rallies and buying in declines?
Thanks.