Recently, I discovered that many retail investors simply don't pay attention to turnover rate. In fact, it's the most direct way to find the main players. Today, I want to share my experience with everyone.

Let's start with the most practical: the turnover rate is the frequency of buying and selling stocks, reflecting how many people are trading this stock. I often use the turnover rate to judge whether a stock is dead water or bubbling with activity.

I've observed for a long time and found that stocks with a turnover rate below 3% are basically ignored. Institutions don't look at them, speculators don't touch them, either they are large blue-chip stocks that can't move, or the themes are too old-fashioned. Between 3% and 5%, some are testing the waters with tentative positions, but not very active yet. The real interesting zone is between 5% and 7%, where bulls and bears start to diverge, and the stock price slowly moves upward, likely because the main players are quietly accumulating.

When the turnover rate hits 7% to 10%, the main players' buying activity begins to pick up. If the stock is falling, it might be a shakeout, with relatively light moves. Between 10% and 15%, the main players clearly want to control the stock, increasing their accumulation efforts. Once enough chips are accumulated, they start pushing the price up. At 15% to 20%, trading becomes lively, volatility increases, and if the stock price is still low, high volume at the bottom could be a sign of an upcoming rally. But if volume surges at high levels with a decline, I would be immediately alert.

The 20% to 30% range tests investors' psychology the most. At low levels, the main players might be aggressively accumulating, trying to attract retail investors to buy in; at high levels, caution is needed, as they might be distributing. Don't be scared by large orders—today's main players often split big orders into smaller ones to sell gradually, reducing costs and preventing retail investors from panicking and dumping.

A turnover rate of 30% to 40% only appears in hot stocks with explosive themes. Main players prefer to accumulate quietly; if the signs are too obvious, the stock might be driven up artificially, increasing costs. This could be a sign of distribution, where they are swapping chips with new buyers. Once the turnover rate hits 40% to 50%, it's very dangerous—attention is everywhere, prices fluctuate wildly, and most people can't hold on. I wouldn't recommend entering.

Above 50% is basically madness. At 60%, buyers and sellers are arguing—buyers say every dip is a buying opportunity in strong stocks, sellers say they've already gained 50% and why wait. Over 70%, it’s completely off the rails, with huge uncertainty. If it's falling, I advise you not to catch falling knives, as there could be unknown negative news, and declines tend to have strong inertia. Over 80%, you should just watch from afar—these stocks are in a frenzy, and it's best to wait until they calm down.

After talking so much about how to interpret the turnover rate, the core idea is: volume increase at low levels is worth paying attention to; volume increase at high levels with a decline I won't touch. My principle is to buy stocks after they stabilize and rebound from the right side, not to panic and go against the trend—that's respecting the market.

Another important point is judging whether a stock is cheap or expensive—never just look at the current price. Which is cheaper: a stock at 70 yuan with a PE ratio of 10, or a stock at 7 yuan with a negative PE? Many would say 7 yuan, but actually, the 70 yuan stock is cheaper. My method is to rank stocks in the same sector by PE ratio, then look at net profit, shareholder count, net asset per share, dividend payout ability, and finally score them comprehensively. Only then can you truly determine if a stock is cheap or expensive.

The official definition of turnover rate is the trading volume over a period divided by the circulating shares, multiplied by 100%. For example, if a stock trades 10 million shares in a month and has 20 million circulating shares, the turnover rate is 50%. In China's stock market, turnover rate is usually calculated only on circulating shares, which better reflects liquidity.

In practical trading, I’ve summarized a few key points: below 3%, turnover rate is too ordinary, indicating no big funds are operating. Between 3% and 7%, stocks become relatively active and should attract attention. Between 7% and 10%, daily turnover rates are common in strong stocks, showing broad market interest. Between 10% and 15%, unless at historical highs or topping periods, it indicates large institutional players are actively operating; if there's a sharp pullback afterward, consider entering. Over 15%, if maintained near dense trading zones, it signals strong upward potential—characteristic of super-strong institutional stocks, likely to become market dark horses.

Also, pay attention to stocks with consistently high turnover and increasing price and volume, indicating deep involvement by big players. Rising prices face selling pressure from profit-taking and stop-loss traders, but the more active and thorough the turnover, the more thoroughly the selling pressure is cleaned out, raising the average cost of holders and reducing resistance on the way up.

Conversely, after a big rise, if turnover drops and the stock fluctuates with the market, it often appears in growth stocks, indicating large chips are locked in, and the main players are operating long-term, with the stock likely to climb further.

Sometimes, you'll see a surge in turnover without much price movement—this indicates a large amount of chips changing hands within a small zone, often pre-arranged, which is very valuable for research.

The first day of a new stock's listing with a high turnover rate is very good, because the stock is allocated via cash subscription, leading to dispersed holdings. Extremely high turnover on the first day indicates active accumulation.

Multiple consecutive days of high turnover with the stock price rising significantly faster than the market is common, but the reasons vary: institutional players building positions, short-term speculators trading, or old institutional players distributing. Need to combine other factors for judgment.

When a stock is about to hit the limit-up, stocks with lower turnover rates are usually better than those with high turnover, especially in weak or consolidating markets. Ideally, ordinary stocks should have turnover below 2%, ST stocks below 1%. During strong market conditions, these thresholds can be relaxed slightly, but never exceed 5%. These limits essentially restrict profit-taking and selling pressure on that day; smaller profit-taking means less selling pressure, and the next day's upward space is larger.

Overall, high turnover indicates active trading and high buying willingness, making it a hot stock. Low turnover means less attention, belonging to a cold stock. High turnover generally correlates with good liquidity and easy entry/exit, but also indicates short-term capital chasing, high speculation, large price swings, and higher risks.

I often combine turnover rate with price trends to predict. If a stock's turnover rate suddenly rises with increased volume, it suggests investors are buying heavily, and the price may rise accordingly. If a stock continues to rise for a period and turnover rate then surges again, it might mean profit-takers are cashing out, and the price could fall.

In emerging markets, turnover rates are generally higher than in mature markets because of rapid expansion, many new listings, and less mature investment concepts, leading to more active trading.

When volume suddenly increases at high levels, it’s a clear sign that the main players want to distribute. But high-volume at high levels is not easy—it usually requires some positive news to facilitate distribution. I focus on bottom-volume, low-price stocks with strong momentum; high turnover in these stocks is more credible, indicating new funds are entering, with greater potential for future gains. The more the turnover at the bottom, the lighter the selling pressure during upward movement.

Ultimately, understanding how to interpret turnover rate helps you see what the main players are doing. This is the experience I’ve accumulated through years of practice, and I hope it helps everyone.