They think it has Hit an ATH and will go for a Pullback and they Short. But it continues to Rise higher.
So I want to know how to react to this market and what do Hodlers do in these situations. Do they Sell, Hold or Buy More.
Why they short in the first place?

If they want to sell, then sell it immediately, don't make it complicated by trade through margin trading.
I see nothing wrong for people who want to sell or hold the coins, some newbies might choose to sell it because they can't hold too long and they want to know if the profit was real or not.