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What does stock chip concentration mean?

Stock chip concentration measures the extent to which a certain stock is held by market makers. When this measure is high, it means that the stock is mostly concentrated in the hands of a few people, especially bookmakers, which usually indicates that the stock price may have the potential to rise. 50% is considered moderate control, and more than 70% indicates high control, which means that market control is stronger and individual stocks may have greater room for upside.

The calculation of concentration involves looking at the distribution of a stock's outstanding shares. When major investors continue to buy a certain stock, the average number of shares held by each shareholder increases and the number of shareholders decreases, which will increase the concentration of chips in the stock. On the contrary, if the stock lacks the main force or the main force has completed shipments, the concentration of chips will be reduced, the shareholdings will be dispersed, and the number of shareholders will increase.

Under a high degree of market control, most of the chips in the market are controlled by the main players, and ordinary investors hold fewer stocks, which allows the main players to directly affect the trend of stock prices. Bankers, that is, large investors with great influence in the financial market, hold a certain proportion of stocks and sometimes only need 10% to 30% of the circulation to achieve control. In the futures market, due to the huge trading volume and capital volume, the presence of bookmakers is relatively rare.

It is worth noting that market makers are also shareholders of stocks. They have an impact on the price of the secondary market by controlling the circulation of specific stocks. Compared with ordinary investors (retail investors), the stock holding behavior and market behavior of market makers are significantly different.