NEW YORK, March 20, 2023 /PRNewswire/ — According to Globalnewsonline: The recent performance of Taiwan stocks is worse than expected. The market of large-weight stocks has been in the doldrums, while the performance of small and medium-sized stocks is quite impressive, as electrical vehicle concept stocks are gaining momentum. It is assumed that the rising volume and stock price may be controlled by major investors. How can retail investors take advantage of simple information to judge their movements? Mr. Chen ZeKun is a seasoned investor with two decades of experience in the stock market. This article aims to elucidate three valuable tips for individual investors, drawn from Mr. Chen’s extensive expertise and personal insights.
Who are the "major forces" of the market with solid financial strength?
Major investors usually refer to those with a large amount of capital and can influence stock prices. They usually command more resources and information, granting them easier access to market news and trends. Therefore, their actions and decisions are often of great concern in the market. In addition, they may also have more well-rounded research teams and analytical tools, allowing them to better understand market trends and stock prices, and make more informed investment decisions. There are three major types of major investors: three major legal persons, insiders and investors with thousands of shares.
Mr. Chen Zekun mentions that among the three major legal persons, "foreign capital and trust investment" carry the greatest influence. Foreign investors prefer weighted stocks because they have the deepest pockets and large research teams. Trust investment, a way of raising funds from investors by domestic securities investment companies, favors small and medium-sized stocks. Dealers like short-term operations with quick profits, but their capital accounts for the smallest proportion of the three major legal persons, so their reference value is low.
The second type of major investor is the company’s key insiders, such as major shareholders, directors, supervisors, and managers, who usually have first-hand information about the company, so their movements are also regarded as the wind vane of the stock price. The third type is investors with thousands of shares. They are not legal persons, nor insiders, but they have abundant capital, holding more than 1,000 shares. Even if the stock price is only 10 TWD, they also have the power to shake the stock price with more than 10 million TWD of investment.
How to know major investors’ secret movements? What is the most advantageous shareholding ratio?
Some investors are accustomed to designing investment strategies through chip changes, especially those who like to follow the investment direction of foreign capital and trust investment, which is considered safer. However, sometimes, even if there are no drastic changes in foreign capital and trust investment, the stock price may fluctuate sharply because investors with thousands of shares are speculating. How can retail investors judge with resources available?
Mr. Chen introduces that the chip change is an important investment indicator, which is of great help for judging the trend of stocks. However, it is just one of many indicators that cannot be relied upon alone to devise an investment strategy.
First, major investors’ movements: In major securities and stock websites, investors can find the buying and selling of major investors on a single day and within a certain range, and detailed lists of overbuying and overselling institutions and brokerage branches so as to facilitate the judgment of which major investor is operating. Foreign capital is dominated by foreign-invested institutions, and insiders and investors with thousands of shares majorly belong to domestic brokerage institutions.
Second, brokerage branch trading daily reports: Investors can make use of brokerage branch trading daily reports to further distinguish major domestic investors. If the brokerage branch is close to the headquarters of certain companies, such as trading electronic stocks in a Hsinchu branch, the operator may be an insider. Investors with thousands of shares may be dubbed like OO Brother and XX Dad in the market, and they usually haunt at several fixed points.
Third, equity dispersion sheets of collective custody: The weekly equity dispersion sheet issued by the collective custody center lists in detail the number of investors of zero shares, whole shares, 100 shares and 1,000 shares, as well as their shareholding ratios. Compared with the previous week’s data, investors can easily observe the changes in the number of general investors and investors with thousands of shares.
For speculation fueled by investors with thousands of shares, investors can judge with some resources available such as the trading volume of the stock, price fluctuations, news information, etc. If the trading volume of the stock suddenly increases and the price fluctuates dramatically with no corresponding news information, it is likely that investors with thousands of shares are speculating. At this time, investors should be cautious not to blindly follow trends.
Investors with thousands of shares usually favor future-oriented small stocks, for they can easily drive the price with little cost. However, they are difficult to control the thinly-spread chips mainly owned by retail investors, because retail investors are easily affected by the news. On the contrary, if the chips are too concentrated, other investors may lose the opportunity to buy and sell, and the stock price may remain stable, reducing number of investors with thousands of shares. Therefore, the most advantageous shareholding ratio is 40-70%.
In addition, investors can also pay attention to some external factors, such as the macroeconomic situation and industry trends. If these factors exert greater impacts on the stock than investors with thousands of shares, investors should pay more attention to these factors.
Mr. Chen emphasizes that investors should consider a variety of factors to judge the trend of stocks, and should not rely solely on chip changes to make decisions.
First, understand the operations of major investors to avoid being ripped off
It is difficult for investors to seize opportunities and avoid traps. Not to mention their secret movements, major investors would even "fabricate buying points and market information" to lure retail investors. If investors make a wrong judgement, they may suffer from a "scam". Therefore, what are the usual scams like?
First, low-price temptation: After locking in the targets, major investors will secretly buy in batches at the trough of the stock price, and utilize the news to "prompt a slump in stock". At this stage, the stock price is falling straight down, and the rock-bottom price shocks retail investors and erodes their patience. When retail investors begin to sell, major investors then take the opportunity to buy. The low price of this wave of chips holds the key to the success of major investors.
Second, selling and buying: When they finish building positions, major investors will attract the attention of the market. At this stage, the trading volume of individual stocks will gradually increase, and the stock price will also reverse, breaking the average and resisting the pressure. The alluring news appearing in the market pushes the participation of legal persons and retail investors.
It should be noted that at this stage, due to a large amount of buying, the stock price will increase at the same time, which will lead to the disorderly scattering of chips. Besides, there will be many fluctuations and liquidations during this time, driving out retail investors lacking in confidence. The next round will begin after the chips have stabilized.
Third, pump and dump: When major investors intend to pocket profits, retail investors should be careful. As the stock price continues to rise at this stage, the market is profitable and retail investors rush to enter, but major investors begin to "pull out", or to sell in batches when the stock price reverses. If retail investors still hold the shares, they will suffer substantial losses in the end.
When major investors exit the market, investors who enter the market behind are caught in the trap. Even worse, some major investors will resort to short-selling at the high point, releasing a large number of bearish news to "entrap more" investors. Mr. Chen reminds that all stocks, good or bad, large or small, can be operated. Whether to follow the alluring trend or simply avoid being ripped off, investors should learn more about the tricks of major investors and remain vigilant.
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