Understanding the Opponent
In the investment market, understanding your “opponent” (institutional investors) is the first step in developing effective investment strategies. This experiment will help you identify key signals of institutional behavior, understand their trading logic, and thus occupy a more favorable position in the market.Institutional “Tricks”: Identifying Fake Breakouts
Institutional investors often use various strategies to create market volatility to achieve their trading goals. One of the most common strategies is creating fake breakouts.What is a Fake Breakout?
What is a Fake Breakout?
A fake breakout refers to a phenomenon where prices briefly break through key technical levels (such as resistance or support levels) and then quickly reverse direction. Through this method, institutions can:
- Attract follow-up buyers
- Trigger stop-loss orders
- Build or close positions at ideal prices
Characteristics of Fake Breakouts
Characteristics of Fake Breakouts
- Abnormal volume: Volume does not match during the breakout, lacking sustainability
- Small breakout range: Prices only slightly break through key levels, failing to effectively hold
- Short duration: Quickly reverses after the breakout, failing to form a trend
- Indicator divergence: Technical indicators diverge from price trends
Common Patterns of Fake Breakouts
Common Patterns of Fake Breakouts
- Upward fake breakout: Institutions push prices to break through resistance levels, attracting retail investors to chase rises, then reverse to short positions
- Downward fake breakout: Institutions suppress prices to break through support levels, triggering retail investors’ stop-losses, then accumulate positions at low prices
Interpreting Volume-Price Relationships: The “Fingerprint” of Institutional Funds
Trading volume is an important indicator for identifying institutional behavior. By analyzing volume-price relationships, we can discover the flow and intentions of institutional funds.Key Volume-Price Signals
Low Volume Decline
High Volume Rebound
Volume Increase with Price Stagnation
Volume Decrease with Price Rise
Volume Analysis Experiment
Let’s learn how to analyze volume through a simple experiment:- Select Target: Choose a stock you follow, such as Kweichow Moutai (600519)
- Collect Data: Collect daily volume and price data for the past 3 months
- Identify Patterns: Look for dates with abnormally high or low volume and observe corresponding price changes
- Analyze Significance: Based on volume-price relationships, determine possible institutional behaviors and intentions
- Verify Results: Observe subsequent price trends to verify if your analysis is correct
It is recommended to choose large-cap stocks with good liquidity for the experiment, as institutional behavior is more obvious in these stocks.
Tracking Institutional Position Changes
Institutional position changes are an important window into understanding their investment strategies. By analyzing institutional position data, we can discover their focus points and preferences.Sources of Institutional Position Data
- Public fund quarterly reports: Disclose position information once a quarter
- Listed company financial reports: Disclose top ten shareholders and tradable shareholders
- Northbound capital flows: Reflect buying and selling trends of foreign capital
- Block trading data: Information on large transactions between institutions
Key Points for Analyzing Institutional Positions
- New entry/exit: Pay attention to stocks newly entered or exited by institutions
- Increase/decrease in holdings: Analyze changes in institutional attitudes towards specific stocks
- Concentration: Observe the concentration of institutional holdings to understand market consensus
- Industry preferences: Analyze changes in institutional allocation ratios across different industries
Time Characteristics of Institutional Behavior
Trading behaviors of institutional investors often have obvious time characteristics. Understanding these characteristics can help us better grasp market rhythms.Intraday Trading Patterns
- Early trading (9:30-10:30): Institutions often conduct large transactions during this time, setting the daily price range
- Midday trading (13:00-14:00): Trading is relatively清淡, institutions may make small adjustments
- End-of-day trading (14:30-15:00): Institutions often conduct concentrated trading before the close, affecting the closing price
Cyclical Characteristics
- Monthly: Institutional position adjustments are more frequent at the end and beginning of the month
- Quarterly: At the end of the quarter, institutions may lift their holdings to beautify performance
- Annual: The end of the year is usually when institutions settle accounts and formulate strategies for the next year
Experimental Task: Establish Your “Institutional Behavior Observation Log”
To help you systematically learn to identify institutional behavior, we have designed a simple but effective experimental task:Identify Abnormal Phenomena
Look for price anomalies, volume abnormalities and other phenomena that may be related to institutional behavior
Analyze Possible Intentions
Based on the observed phenomena, analyze the possible trading intentions of institutions
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