Recently, I found that many retail investors simply don't understand the meaning of stock turnover, still blindly following the trend, which is really quite unfortunate. Today, I want to give everyone a thorough explanation of the turnover rate, once you grasp it, you'll be able to see what the main players are doing.

Let's start with the simplest understanding: the turnover rate is the frequency of stock trading, reflecting how active this stock is. You see, buyers are shouting "Fool, when a strong stock drops, it's time to buy," while sellers are shouting "I've already made 50%, when is the best time to sell?" Both sides have their reasons, but who is right and who is wrong? Actually, both are right and wrong at the same time. This is the interesting part of the market.

The official definition of the turnover rate is: the trading volume during a certain period divided by the circulating shares, multiplied by 100%. For example, if a stock's monthly trading volume is 10 million shares, and the circulating shares are 20 million, then the turnover rate is 50%. It sounds simple, but there are many nuances behind it.

I’ve noticed that different turnover rate ranges correspond to completely different stock performances. Stocks with a turnover rate below 3% are basically ignored; institutions don't care, retail funds dislike them, either because the overall market is sluggish or because the theme is too traditional. Between 3% and 5%, some are testing the waters with tentative positions, but not very active. From 5% to 7%, bulls and bears start to diverge, and the stock price slowly rises, which is likely when the main players are quietly accumulating.

A turnover rate of 7% to 10% indicates that the main players' buying activity is becoming more aggressive. If the price is falling, it might be the main players suppressing and shaking out, but the moves are still relatively light. From 10% to 15%, the main players want to control the market, increasing their accumulation efforts, and after accumulating enough, they will push the price up. From 15% to 20%, it’s a signal before activation, especially with volume at low levels—close attention is needed.

A turnover rate of 20% to 30% means the battle between bulls and bears is already intense. At low levels, the main players might be aggressively accumulating, trying to attract retail follow-through with high turnover; at high levels, caution is advised, as it could be distribution. Smart main players now split large orders into smaller ones to sell gradually—reducing costs and avoiding retail panic selling.

Above 30%, it’s super high turnover. Stocks with a 40% to 50% turnover rate attract enormous attention, with huge price swings that most people can't hold through, very risky. Between 50% and 60%, a certain news event might trigger significant disagreement—selling at high levels for profits made earlier, buying at low levels to catch the dip. Over 60%, it’s madness—buyers and sellers curse each other. Unless there’s a sudden major positive development at the bottom, avoid these stocks. Between 70% and 80%, it’s already off the normal track; if the price is falling, I advise you not to buy the falling knife, as there might be unknown negative news. Over 80%, almost all chips are changing hands, emotions are at their peak—these stocks should only be observed from afar, not played with.

Regarding identifying the main players, my experience is: low turnover rate but continuous rising prices indicate that medium- to long-term main players are operating, making such stocks very sustainable with low risk. Conversely, if a stock is moving within a downward channel with extremely low turnover, with no trading activity, that’s a typical bottom signal—pay close attention.

The key is to combine the turnover rate with the stock’s price trend. Volume increase at the bottom during an upward move is worth noting; volume increase at a high level during a decline is something I personally wouldn’t engage in. High turnover at high levels often signals distribution—what we call "sky-high volume, sky-high price."

Another important observation: continuous high turnover over several days, with the stock price soaring and far outperforming the market, has always existed, but the outcomes vary widely. It could be main players raising the stock, short-term retail funds speculating, or old institutional players distributing. It’s necessary to combine other factors for further judgment.

In summary, high turnover indicates active trading and popularity, but also entails greater risk and speculation. Low turnover suggests less interest, but at the bottom, low turnover can be an opportunity. Most importantly, don’t blindly trust the turnover rate; it should be combined with the stock’s position, overall market trend, and thematic heat. My principle is: volume at low levels signals opportunity; volume at high levels signals escape. Be cautious when needed, don’t go against the trend—that’s respecting the market.