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Counter Strategies
After understanding the behavior patterns of institutional investors, we need to develop effective counter strategies. This experiment will teach you how to gain an advantage in the game against institutions and achieve your investment goals.Contrarian Strategy: Enter When Institutions Reduce Positions
Contrarian investing is a classic strategy that often yields good results when institutional investors act collectively. Especially in extreme market sentiment situations, contrarian thinking may help you discover undervalued investment opportunities.Core Logic of Contrarian Buying
Due to their large capital size, institutional investors often struggle to build positions quickly at market bottoms. When panic spreads and institutions are forced to reduce positions, it may be an opportune time for individual investors to enter the market in stages.1
Identify Signals of Forced Institutional Selling
Watch for these signals:
- High-volume declines, especially when important support levels are broken
- Significant drop in margin financing balance, indicating forced liquidation of leveraged positions
- Rapid decrease in institutional holdings ratio
2
Evaluate Fundamental Value
Confirm that the fundamentals haven’t substantially deteriorated:
- Review the latest financial reports, focusing on revenue and profit growth
- Analyze industry prospects and assess long-term development trends
- Compare valuation levels (P/E, P/B, etc.) with historical and industry averages
3
Develop a Staged Buying Plan
Don’t buy all at once, instead:
- Set multiple buying points based on price decline幅度
- Invest no more than 20% of total funds at each point
- Reserve some funds for potential extreme situations
4
Set Stop-Loss Protection
Contrarian investing also requires risk control:
- Set clear stop-loss points (e.g., 15-20% of buying cost)
- Decisively cut losses when fundamentals do deteriorate
- Regularly review positions to assess if the logic still holds
5
Patiently Wait for Rebound
Contrarian investing takes time:
- Be patient and don’t rush to take profits
- Consider gradually reducing positions when institutions start re-entering (indicated by increased trading volume)
- Set reasonable profit targets (e.g., 30-50%)
After the outbreak of the Russia-Ukraine war in 2022, the market experienced panic selling, and many institutions were forced to reduce positions. In the following months, investors who bought contrarianly achieved significant excess returns.
Hedging Strategy: Reducing Market Volatility Risk
In a declining market environment, hedging is a common risk control method used by institutions. Individual investors can also learn to use simple hedging tools, such as ETFs, to reduce portfolio volatility risk.- Gold ETF Hedging
- Index ETF Hedging
- Bond ETF Hedging
Gold, as a traditional safe-haven asset, often performs well when market uncertainty increases. Gold ETFs (such as HuaAn Gold ETF, 159934) provide convenient access to gold investments.
Suitable Scenarios for Gold ETF Hedging
- When the market faces systemic risks (such as economic recession, geopolitical conflicts)
- During periods of rising inflation pressure
- At key nodes where monetary policy may shift
Recommended Allocation Ratio
Based on the degree of market risk, the allocation ratio of gold ETFs in the portfolio can be adjusted between 5-20%.
Swing Trading: Utilizing Institutional Position Adjustment Rhythm
Due to their large capital size, institutional investors often require time to adjust their positions, which provides opportunities for individual investors to engage in swing trading.Key Steps for Swing Trading
Identify Institutional Position Adjustment Signals
Determine Key Price Ranges
Develop Trading Plan
Strictly Enforce Discipline
Risk Control for Swing Trading
- Control Position Size: Single trade capital should not exceed 10-15% of total funds
- Set Stop-Loss: Establish clear stop-loss points before each trade
- Enter and Exit in Stages: Avoid buying or selling all positions at once
- Take Profits Timely: Gradually realize profits after reaching target returns
Information Gap Strategy: Utilizing Institutional Research Reports
Institutional investors typically have professional research teams, and their research reports contain a wealth of valuable information. Individual investors can gain in-depth understanding of the market and individual stocks by analyzing institutional research reports.How to Effectively Read Institutional Research Reports
- Focus on Report Logic: Emphasize reading the analysis framework and logical deduction in the report, not just the conclusions
- Compare Multiple Views: Synthesize research reports from multiple institutions to find consensus and differences
- Track Report Changes: Follow changes in research reports from the same institution on the same subject, especially adjustments to ratings and target prices
- Mine Hidden Information: Pay attention to risk warnings and assumption conditions in the reports, which often contain important information
Notes for Using Research Reports
- Avoid Blindly Following: Institutional research reports may also have biases and need to be combined with your own judgment
- Note Report Timeliness: Market conditions are constantly changing, update information in a timely manner
- Pay Attention to Institutional Conflicts of Interest: Understand possible interest relationships between the report publishing institution and the research subject
Experiment Task: Build Your Counter Strategy Portfolio
Now, let’s apply the strategies we’ve learned to actual investments:1
Assess Current Market Environment
Analyze what stage the current market is in and what the main risks and opportunities are
2
Select Appropriate Counter Strategies
Based on market environment and personal risk preference, select 1-2 strategies as key focuses
3
Develop Detailed Operational Plan
Clearly define buying/selling conditions, position control, stop-loss and take-profit points, etc.
4
Simulate or Small Position Test
Before actually investing large funds, conduct simulated trading or small position tests
5
Record and Summarize
Record the trading process and results, analyze the reasons for success and failure, and continuously optimize strategies
In the context of China’s economic downturn in 2025, it is recommended to prioritize defensive strategies such as contrarian buying of high-quality stocks that have been unjustly sold off and using gold ETFs for hedging.