Recently, I was organizing my stock trading notes and suddenly realized something many people overlook—turnover rate. Honestly, if you're still judging cheap or expensive solely by stock price levels, you're just fooling yourself.

First, the most straightforward explanation: turnover rate is the frequency of stock buying and selling transactions, reflecting how active this stock truly is. You can understand it this way: a high turnover rate indicates the stock is changing hands frequently, showing that the market pays a lot of attention to it. But there's a trap—high turnover doesn't necessarily mean it's good; it depends on the position where it appears.

I’ve found that many people simply don't understand whether the stocks they hold are cheap or expensive. It’s not about looking at the current price, brother. A stock at 70 yuan with a P/E ratio of only 10 times might be much cheaper than a 7 yuan stock with a negative P/E. To judge a stock’s true value, you need to compare several metrics horizontally: P/E ranking within the sector, net profit ranking, changes in shareholder numbers, net asset per share, dividend-paying ability. Rank all these indicators, and you can give yourself a comprehensive score for your holdings.

Regarding the calculation of turnover rate, it’s actually very simple: the trading volume over a certain period divided by the circulating shares, then multiplied by 100%, equals the turnover rate. For example, if a stock trades 10 million shares in a month and the circulating shares are 20 million, the turnover rate is 50%.

Now, let me explain what different turnover rate ranges represent. Stocks with 1%-3% turnover are usually very quiet, ignored by institutions and not favored by speculators, mostly large-cap stocks or those lacking attractive themes. 3%-5% indicates some tentative accumulation, but still not very active. 5%-7% gets interesting—both bulls and bears start to have disagreements, and if the stock price gradually rises, it’s likely that the main players are quietly accumulating.

A daily turnover rate of 7%-10% is common in strong stocks, indicating the stock has already attracted widespread market attention. 10%-15% is even more intense; the main players want to control the stock, increasing their accumulation efforts. Once enough chips are accumulated, the next step is to push the price higher. When the turnover hits 15%-20%, trading becomes more active. If the volume increases at a low price level, it could be a sign of initiation; but if it volume surges at a high level and the price drops, be cautious.

Turnover rates of 20%-30% indicate fierce battles between bulls and bears. If this occurs at a low point, the main players might be aggressively accumulating, trying to attract retail investors to buy in with high turnover. If it happens at a high point, it’s likely distribution. Today’s main players are smart—they won’t dump large orders all at once but will break them into smaller orders to sell gradually, reducing friction costs and preventing retail investors from panicking and selling off.

A turnover rate of 30%-40% only appears in hot stocks with strong themes, but in such cases, it’s hard to tell whether the main players are accumulating or distributing. 40%-50% is very risky; such stocks carry extremely high risk, and ordinary investors simply can’t hold on. When turnover exceeds 50%-60% or more, it’s an extremely crazy state—buyers and sellers blame each other. If a huge positive news event occurs at the bottom, there might still be a chance; but if it’s at the top, it’s profit-taking by early winners and new investors stepping in to buy.

Once turnover exceeds 60%-70%, it’s already off the rails; 80%-100% is when nearly all chips are being exchanged, and emotions are at their peak. My advice is: such stocks should only be observed from afar, not played with—wait until things calm down.

When identifying the main players, I usually look in three directions. First, if a stock has very low turnover but the price keeps rising, it indicates medium- to long-term institutional operation, making such stocks more sustainable and less risky. Second, if a stock is in a downtrend with extremely low turnover, especially after a shakeout, it suggests the price is near the bottom and warrants close attention. Third, don’t blindly believe that “higher turnover means higher price increase”—this only applies when the stock is still in a rising phase. When the stock price has already risen significantly and is far from the main players’ cost basis, high turnover can actually signal distribution.

In practical trading, a few key points are worth noting. Turnover below 3% is very common and indicates no major capital operation. Between 3%-7%, the stock enters a relatively active state and should attract attention. Daily turnover of 7%-10% is common in strong stocks. If it exceeds 10%-15% and isn’t at a historical high or peak, it suggests that a strong institutional player is actively operating. Surpassing 15% daily turnover, if maintained near intense trading zones, could mean enormous upward potential—characteristic of super-strong institutional stocks.

Also, pay attention to stocks with consistently high turnover and increasing price and volume, indicating deep involvement by big players. As they clear out the selling pressure, the average cost of holders rises, and upward resistance diminishes. Conversely, if after a big rise the turnover rate drops and the stock fluctuates with the market, it’s often seen in growth stocks, showing that large amounts of chips are locked in, and the main players are operating long-term.

A sudden surge in turnover without much price fluctuation is also worth studying—it indicates a large amount of chips changing hands within a specific small range, usually pre-arranged. The higher the turnover on the first day of a new stock’s listing, the better, because holdings are quite dispersed, and high turnover indicates active accumulation. Continuous high turnover over several days with the stock price soaring far beyond the market is common, but the outcome varies and requires further analysis with other factors.

My personal trading principle is: volume increase at low levels is worth watching; volume increase at high levels with a falling price I personally avoid; when a stock is continuously falling, I won’t go in to catch a falling knife. Even if I like a stock, I wait until it stabilizes before entering from the right side. When it’s time to be cautious, be cautious—don’t fight the trend. That’s respect for the market and respect for your own pocket.