Analyze the relationship between volume and price that usually occurs when the price of a currency falls after reaching its peak, as well as the corresponding psychological forces of retail investors and market makers.
After the price of the currency peaked, the relationship between volume and price in the falling process is generally: a large volume with a small drop ➡️ a large volume with a large drop ➡️ a small volume with a large drop. Why is there such a relationship between volume and price? Don't memorize it by rote, remember it with understanding.
Step 1: Put a lot of small drops
After the currency price reaches its peak, buying begins to decrease while selling begins to increase, the two sides clamp down on each other, and eventually the rising selling power (mainly manipulated by the dealer) exceeds the buying power, causing the currency price to increase significantly (the increase can be simply regarded as the increased selling power), but because there is still buying power to support it, the decline is small.
Step 2: Large volume and large decline
The price of the currency continued to fall. When the price of the currency first fell, retail investors generally did not realize it so early, so they did not run away, thinking it was just a small shock. Some retail investors wanted to buy at the bottom, and they bought as much as the selling price was. However, the dealer was not a pushover, and continued to sell, and controlled the selling power to be always stronger than the buying power, resulting in the transaction volume still increasing (more buying and more selling), but the price of the currency continued to fall.
Step 3: Large decline in volume
As the price falls further, there is almost no buying. The continuous decline makes no retail investors dare to buy. Not only do they not buy, but they start panic selling. At this time, the trading volume gradually shrinks, because there are no buying orders but only selling orders, resulting in a shrinking trading volume, which can also cause a large decline.
Finally, the banker just sits and waits at the bottom for retail investors to sell cheap chips, and starts the next wave of price increases after accumulating enough chips.
In fact, the relationship between volume and price is the duel between bankers and retail investors, with ups and downs in the struggle. If we can look at the problem from the perspective of bankers, we can avoid many detours.
