Recently, I’ve noticed that many people trade stocks based solely on intuition, without paying attention to turnover rate. What I want to say is, such trading is really too risky.

First, let’s talk about what the turnover rate is. Simply put, it’s the frequency of stock trading, reflecting how active a stock is. The calculation method is: trading volume divided by the circulating shares, then multiplied by 100%. For example, if a stock trades 10 million shares in a month, and the circulating shares are 20 million, then the turnover rate is 50%.

I’ve observed for a long time and found that the turnover rate really can reveal what the main players are doing. A low turnover rate indicates that both bulls and bears have similar opinions, and the stock price usually fluctuates slightly or moves sideways. But a high turnover rate is different; it suggests significant disagreement. As long as this active state can be maintained, the stock price generally will rise.

How to interpret it specifically? I’ll break it down into several ranges. A turnover rate of 1%-3% indicates that no one is paying attention to this stock; institutions are ignoring it, and retail investors are not interested. 3%-5% means some tentative positions are being built. 5%-7% shows disagreement between bulls and bears; at this point, be alert, as it might be the main force quietly accumulating shares. 7%-10% indicates that the main players are actively buying; if the price is falling, be cautious of shakeouts. 10%-15% suggests the main force is trying to control the stock, increasing their accumulation efforts.

When the turnover rate reaches 15%-20%, trading becomes more active. If the stock price is still low and volume increases, it could be a sign of an upcoming breakout. But if it’s a high-level volume decline, I personally would be very cautious. 20%-30% indicates intense bulls and bears competition; if at a low level, the main force might be aggressively accumulating, but at a high level, it could be distributing shares.

A turnover rate above 30%-40% only appears in hot stocks with strong themes. Honestly, genuine main players prefer to accumulate quietly because obvious signs tend to push the stock price higher, increasing their purchase costs. So, such extremely high turnover rates might actually indicate the main force is offloading shares, transferring chips to the new buyers.

I especially want to emphasize high turnover at low prices. If a stock has been sluggish for a long time and suddenly shows high turnover, and this high turnover can be sustained for several trading days, it indicates new funds are coming in. At this point, the high turnover rate is very credible because it’s volume at the bottom with full turnover, suggesting a larger upward potential and a higher chance of becoming a strong stock.

Conversely, if the stock price has already risen sharply and suddenly the turnover rate surges again, be cautious. I often say “sky-high volume, sky-high price,” which means during an uptrend, the turnover rate should stay relatively high and steady. Once the turnover rate drops, it indicates less capital is following, and the upward momentum will weaken.

How to identify main players through turnover rate? My experience is that if a stock has a very low turnover rate but the price is rising, it indicates that medium- to long-term main players are operating. Such stocks tend to be more sustainable and carry less risk. On the other hand, if a stock is in a downward channel with extremely low turnover, and there’s no trading activity—especially if there was previous accumulation by main players—after shakeouts, this situation warrants close attention because the stock might already be at the bottom.

In practical trading, I pay special attention to a few situations. First, stocks with sustained high turnover and increasing volume along with rising prices indicate deep involvement by the main players. As the price rises, profit-taking and short-covering sell pressure will gradually clear out, raising the average cost of holders and reducing selling pressure later. Second, after a significant rise, if the turnover rate drops and the price moves with the overall market, it’s common in growth stocks, indicating the chips are locked in and the main players are operating long-term. Third, a surge in turnover with little price fluctuation suggests a large amount of chips changing hands within a small range, often pre-arranged, which has high research value.

My core advice is: pay attention to volume increase at low prices, but avoid participating in volume increase at high prices when the stock is falling. When I am optimistic about a stock, I will only enter after it stabilizes, from the right side of the chart. Respect the trend and don’t fight against the market. Through the turnover rate indicator, you can see the intentions of the main players clearly and avoid getting trapped.