Recently, I was organizing my trading notes and suddenly realized that a very crucial aspect I had overlooked—turnover rate. Honestly, many people have been trading stocks for years, but their understanding of turnover rate is still superficial, which directly affects whether you can hold on for the bottom or escape at the top.

Let's start with the basics: the turnover rate is the frequency of buying and selling stocks, reflecting how active a stock is. The simple calculation is the trading volume over a certain 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 shares outstanding, the turnover rate is 50%.

I’ve found that those who truly understand the main force’s intent behind the turnover rate don’t need to look at complicated technical indicators. A low turnover rate indicates no one cares about this stock; both bulls and bears have similar opinions, and the price usually consolidates or slightly declines. But a high turnover rate is different—disagreements are larger, trading is active, and the stock price often rises.

There’s a trick here. I’ll share my years of observation:

1%-3% turnover rate, stocks at this level are basically ignored, large-cap stocks, traditional themes, no eye-catching effects. 3%-5% is when some tentative positions are being built. When it’s 5%-7%, bulls and bears start to disagree; if the price is gradually rising, it might be the main force quietly accumulating.

At 7%-10%, it gets interesting. The main force’s buying begins actively; if this appears during a decline, it indicates the main force is lightly shaking out the weak hands. 10%-15% turnover rate means the main force wants to control the stock, increasing their accumulation efforts. When it reaches 15%-20%, trading becomes lively, volatility increases, and volume at low prices is a precursor to a move up, but volume at high prices dropping should raise caution.

20%-30% indicates fierce battles between bulls and bears. At low levels, the main force might be aggressively accumulating, trying to attract retail investors to buy along with them; at high levels, it’s about distributing shares. Nowadays, main players are smart—they split large orders into smaller ones to sell gradually, reducing friction costs and avoiding retail investors from panicking and dumping.

30%-40% only appears in stocks with hot themes. The main force prefers to quietly accumulate; obvious signs make the price easy to be driven up artificially. This level of turnover might be the main force selling to the new investors. Stocks with 40%-50% turnover are extremely risky; most people can’t hold on. 50%-60% is what I call the situation where a huge divergence occurs due to some news—selling profits made earlier, while buyers are looking to catch the falling knife.

60%-70% is already extremely crazy, with both sides exchanging harsh words. 70%-80% is off the normal track; during declines, don’t buy the falling knives because there might be bad news you don’t know. 80%-100% is even more extreme—almost all chips are changing hands, emotions are at their peak. I advise you to just observe from afar and not play recklessly.

Regarding practical application of understanding main force turnover, I’ve summarized a few key points. Stocks with consistently high turnover and rising prices with increasing volume indicate that the main force has deeply entered. When a stock’s price surges significantly and the turnover rate drops back, following market fluctuations, it’s usually a sign of long-term operation by the main force, with the chips locked in, leaving room for further growth.

Another phenomenon: a surge in turnover rate with little price fluctuation suggests pre-arranged turnover, which has research value. Multiple consecutive days of high turnover with the stock continuing to rise far outperforming the market could mean the main force is raising the stock price to build positions, or it could be short-term speculators playing, or even the old institutional investors distributing shares. It’s necessary to combine other factors for judgment.

My experience is that volume increase at low prices is worth attention, while volume increase at high prices during a decline should be avoided. Even if I like a stock, I wait until it stabilizes and enter from the right side. Don’t fight the trend; this is respecting the market.

Many people ask me how to judge whether a stock is cheap or expensive. It’s actually related to turnover rate. You can’t just look at the current price; you need to consider intrinsic value. A stock with a PE ratio of 10 at 70 yuan might be cheaper than one with a negative PE ratio at 7 yuan. My method is: first, compare PE ratios within the same sector, then look at net profit rankings, followed by shareholder numbers, net assets per share, dividend-paying ability, and score them comprehensively. Only then can you truly judge whether your stock is cheap or expensive.

In summary, learning to read the turnover rate means understanding the actions of the main force. Continuous rise with low turnover indicates medium- to long-term main force operation, which is more sustainable and less risky. A sudden increase in turnover with volume expansion might be a signal of large-scale buying. When a stock continues to rise and the turnover rate quickly jumps, beware of profit-taking.

In emerging markets, turnover rates are generally higher than in mature markets because of more new stocks, less investor experience, and more active trading. The first day of a new stock’s listing with a high turnover rate is a good sign of active fundraising.

One last practical tip: when a stock is about to hit the daily limit-up for the first time, stocks with lower turnover rates are usually better than those with higher. Especially in weak or consolidating markets, pay attention. Ideally, for common stocks, the turnover should be below 2%, and for special treatment (ST) stocks, below 1%. In strong markets, these thresholds can be relaxed slightly, and for leading stocks, a bit more leniency is acceptable, but never exceeding 5%. This essentially limits the size of profit-taking and selling pressure on that day; the smaller the profit-taking, the greater the room for the next day’s upward move.

Once you understand these, your understanding of the stock market deepens. Turnover rate is not just a number; it reflects the intentions of the main force, the emotions of retail investors, and the market’s game. Learning to interpret it will make your trading more rational and directional.