Just now while watching the market, I suddenly thought of a question—many people have been trading stocks for so many years, do they truly understand what stock turnover means? To be honest, most people just look at candlestick charts and trading volume, and don't really take turnover rate seriously, but I dare say, this is the most critical indicator for finding the main players and judging stock activity.

Simply put, the turnover rate is the frequency of buying and selling transactions of a stock. Think about it, the more frequently a stock is traded, the more attention it attracts, and the higher its activity level. Conversely, stocks with no trading are truly obscure, and no matter how cheap they are, they are useless.

I often see people struggling over whether a stock is cheap or expensive, saying that 70 yuan is more expensive than 7 yuan, but this is a big mistake. The real measure of cheapness is based on the price-to-earnings ratio and intrinsic value, not the current price. But to determine whether a stock is being watched by the main players, the turnover rate can give you the answer.

Let me break down what different levels of turnover rate mean. A turnover rate of 1% to 3% is basically dead silence, nobody cares. 3% to 5% means some tentative accumulation is starting, but still not active. At 5% to 7%, bulls and bears begin to have differing opinions; if the price is gradually rising at this point, it’s likely that the main players are quietly accumulating.

What’s really interesting is the 7% to 10% range, where the main players’ buying activity starts to become active—this is a signal. If such a turnover rate appears during a decline, it indicates that the main players are suppressing the price or shaking out weak hands, but their actions are still relatively gentle. When the rate reaches 10% to 15%, the main players’ intention to control the market becomes very clear—accumulation is intensifying, and once enough stock is accumulated, the next step is to push the price higher.

At 15% to 20%, trading activity becomes lively, and volatility increases. At this stage, you need to look at the stock’s position—if volume surges at a low price level, it could be a sign of an upcoming move; if volume surges at a high level with a downward trend, be cautious. Between 20% and 30%, the battle between bulls and bears becomes fierce. At low levels, the main players might be aggressively accumulating, trying to attract retail investors; at high levels, it could be a sign of distribution.

Nowadays, main players are very clever—they don’t place large orders directly but split big orders into smaller ones to sell gradually, reducing friction costs and avoiding scaring retail investors into panic selling. A turnover rate of 30% to 40% is already very high, usually only seen in hot stocks with strong themes. Main players prefer to accumulate quietly because obvious signs can lead to the stock being driven up, raising their purchase costs.

When the turnover rate hits 40% to 50%, attention skyrockets, and the stock price swings wildly—most people can’t hold on, and the risk is very high. Between 50% and 60%, it might be due to a major news event causing significant divergence—those selling are often those who made profits earlier, while buyers are trying to catch the falling knife. From 60% to 70%, it’s extremely frantic, with buyers and sellers cursing each other. If at the bottom, it could be a sudden huge positive; if at the top, it’s a sign of distribution.

Once the turnover rate reaches 70% to 80%, it’s already off the normal track, and the stock’s uncertainty is extremely high. If it’s falling, I advise everyone not to catch the falling knife, as there might be negative news you don’t know about. From 80% to 100%, nearly all chips are turning over, and emotions are at their peak—these stocks should be observed from afar, not played with.

Therefore, stock turnover means observing activity level and main player actions. Volume increase at low prices is worth attention; volume increase at high prices during a decline I personally wouldn’t intervene in, nor would I buy the dip during a continuous decline. Even if I like a stock, I’d only buy after it stabilizes and shows signs of bottoming out. If you’re going to buy, do so on the right side after the trend stabilizes. Be cautious and don’t fight the trend—that’s my respect for the market.

To truly understand whether a stock is cheap or expensive, I’ll teach you a method. First, look at which sector your stock belongs to, then rank all stocks in that sector by price-to-earnings ratio from low to high, and see where your stock stands. Then do the same ranking by net profit, shareholder count, net asset value per share, and dividend payout ability. Finally, combine all these rankings to score your stock—this is the real way to determine if it’s cheap or expensive.

The official definition of turnover rate is “turnover ratio,” which refers to the frequency of stock trading within a certain period in the market. The calculation is simple: turnover rate equals the trading volume during a period divided by the circulating shares, multiplied by 100%. For example, if a stock trades 10 million shares in a month, and the circulating shares are 20 million, the turnover rate is 50%.

In practice, a turnover rate below 3% is quite normal, indicating no significant capital operation. Between 3% and 7%, the stock is relatively active. A daily turnover rate of 7% to 10% often appears in strong stocks, indicating high activity. Stocks with a turnover rate of 10% to 15%, unless at historical highs or mid- to long-term peaks, suggest large-scale manipulation by major players. If the daily turnover exceeds 15% and remains near intense trading zones, it could mean the stock has great upward potential—characteristic of super-strong institutional control.

Pay attention to stocks with consistently high turnover and increasing volume, as this indicates deep involvement by big players. As the stock price rises, profit-taking and stop-loss selling pressure increase, but the more active the turnover, the more thoroughly the selling pressure is cleaned out, raising the average cost basis of holders and reducing selling pressure on the way up.

Sometimes, after a sharp rise, the turnover rate drops back, and the stock price fluctuates with the market—common in growth stocks, indicating that large amounts of chips are locked in for long-term operation. Another scenario is a surge in turnover with little price fluctuation and minimal market change, indicating large amounts of chips are being exchanged within a specific small zone, often pre-arranged, which is worth studying.

New stocks typically have high turnover on their first day, which is normal. Continuous high turnover over several days followed by significant price increases far outperforming the market can have multiple explanations—either institutional accumulation, short-term speculative trading, or distribution by big players—requiring further analysis with other factors.

When a stock approaches a limit-up for the first time, stocks with lower turnover rates tend to perform better than those with higher rates. This is especially important in weak or consolidating markets. Ideally, ordinary stocks should have turnover below 2%, and ST stocks below 1%. Under any circumstances, it should never exceed 5%. These limits essentially reflect the amount of profit-taking orders on that day; fewer profit-takers mean less selling pressure, leaving more room for the next day’s upward move.

High turnover often indicates several situations. The higher the turnover, the more active the trading, and the more willing investors are to buy—these are hot stocks. Conversely, low turnover suggests less attention, making them cold stocks. High turnover generally means good liquidity, easier entry and exit, and less risk of being unable to buy or sell. However, stocks with high turnover are often targeted by short-term speculators, with higher volatility and risk.

Combining turnover rate with stock price trends can help predict future movements. A sudden increase in turnover rate and volume may indicate large buying interest, potentially pushing the stock higher. Conversely, if after a sustained rise, the turnover rate quickly spikes, it might mean some profit-takers are cashing out, and the stock could decline.

Generally, emerging markets have higher turnover rates than mature markets, mainly because of rapid expansion, more new listings, and less developed investment concepts, leading to more active trading.

Finally, about the principle of trading high-turnover stocks: a sudden increase in volume at relatively high levels indicates a clear intention by the main players to distribute. However, it’s not easy to see volume spikes at high levels; they usually occur when positive news is released, allowing the main players to distribute smoothly. Strong stocks with volume at the bottom and not too high are more credible, indicating new capital inflow and larger future upside potential. The more the turnover at the bottom, the lighter the selling pressure during upward movement. New stocks are a special case—high turnover at listing is very natural.

In summary, understanding stock turnover’s core meaning is: it reflects the activity and liquidity of a stock. By analyzing changes in turnover rate and its position, you can judge the actions of the main players and market sentiment, leading to more rational investment decisions. This is much deeper than simply looking at candlestick charts or volume.