Recently, I found that many people trade stocks by blindly buying and selling, completely ignoring the turnover rate. Honestly, if you don't even understand the turnover rate, watching the market is pointless. Today, I will thoroughly explain this concept because it is truly the best tool for finding main players and judging a stock's activity level.

Let's start with the simplest understanding: the turnover rate is the frequency of stock trading, reflecting how active this stock is. If a stock has a turnover rate of 60%, it indicates that the chips are being exchanged sufficiently and easily, with buyers feeling they've made a profit and sellers feeling they've done the right thing. This is the most interesting part of the stock market—there are always people on opposite sides.

I want to ask everyone a question: do you really understand what a high turnover rate means? Many people see a high turnover rate and think it's a good thing, but actually, that's not always the case. The meaning of the turnover rate can change completely depending on the stock's price position. When volume increases at the bottom, a high turnover rate? That’s a sign of new funds entering the market and is worth paying attention to. But if the stock price has already risen to a high level and suddenly the turnover rate surges, it might be the main force offloading. This is what I often call "heavenly volume meets heavenly price"—not a good sign.

Let me categorize different turnover rates and the corresponding stock states. 1% to 3% turnover rate is basically a neglected stock, uninteresting to institutions and no love from retail funds. When it reaches 3% to 5%, some tentative positions start to build. 5% to 7%, both bulls and bears have disagreements, and it’s very likely the main force is slowly accumulating shares. 7% to 10%, the main buying interest begins to actively increase; if the stock is falling, it might be a shakeout.

When the turnover rate hits 10% to 15%, the main force’s intention to control the market becomes very clear, with increased accumulation, followed by a rise. Between 15% and 20%, trading becomes active, volatility intensifies. If the stock is still at a low position with volume at the bottom, it could be a sign of a pre-launch. But if there's volume at a high level with a decline, I personally would be very cautious.

A 20% to 30% turnover rate indicates a fierce battle between bulls and bears. If it occurs at a low level, the main force might be aggressively accumulating shares to attract retail investors; if at a high level, it could be unloading. Today's main players are very smart—they split large orders into smaller ones to sell gradually, reducing friction costs and avoiding retail investors from panicking and dumping.

A 30% to 40% turnover rate is already very high, usually only seen in hot stocks with strong themes. But there's an interesting phenomenon: when the main force is accumulating, they usually prefer to do so quietly. If the signs are too obvious, the stock price can be easily driven up, increasing buying costs. So, such extremely high turnover rates might actually be the main force offloading, replacing chips with new hands.

When the turnover rate reaches 40% to 50%, attention is already extremely high, with large price swings. Most people can't hold on, and such stocks carry high risk. I advise caution. At 50% to 60%, it’s often due to a major news event causing huge divergence—prices at high levels, with sellers usually being those who made profits earlier, and buyers trying to buy the dip.

60% to 70% can be considered extremely crazy, with buyers and sellers insulting each other. If such a turnover rate appears at the bottom, it’s usually a sudden major positive news; if at the top, be cautious. 70% to 80% has already deviated from normal, with extremely high uncertainty. If the stock is falling, I strongly advise not to catch falling knives, as there may be unknown negative news, and the decline tends to be very persistent. Such a level of turnover rate suggests the market will likely continue to fluctuate wildly. 80% to 100% means almost all chips are being exchanged, with emotions at their peak. My advice is to only observe from afar and not to play with such stocks; wait until things calm down before stepping in.

Now, I’ll talk about how to identify main force actions through the turnover rate. When the main force operates a stock medium- to long-term, the turnover rate stays relatively low, but the stock price keeps rising. This pattern indicates deep involvement by the main force, and such stocks tend to be very sustainable with low risk. Conversely, if a stock is in a downward channel with an extremely low turnover rate—especially if the main force built positions earlier and then shook out—this warrants close attention, as the stock might already be at a bottom.

A common misconception I want to correct: don’t think that higher turnover rate always means higher stock price. That’s true during the upward phase. But once the stock has risen significantly and is far from the main force’s cost basis, the situation is completely reversed: high turnover rate can be a sign of distribution. During an uptrend, the stock must maintain a steady, high turnover rate; once the turnover rate starts decreasing, it indicates less capital is supporting the rise, and the upward momentum weakens.

My practical experience is this: turnover below 3% is very ordinary, usually indicating no strong capital operation. Between 3% and 7%, the stock enters a relatively active state and is worth watching. A daily turnover of 7% to 10% often appears in strong stocks, indicating high activity, and these stocks are being or have been widely noticed by the market.

A daily turnover of 10% to 15%, if not at a historical high or a mid- to long-term top, suggests a large-scale operation by a strong institutional player. If a significant correction follows, and during the correction, the stock meets the minimum volume law, it might be a good entry point. Over 15%, if the stock can stay near the dense trading zone of the day, it could mean huge upward potential—an indicator of a super-strong institutional player.

I especially want to emphasize paying attention to stocks with consistently high turnover and increasing volume along with rising prices. This shows the big players are deeply involved. As the stock price rises, profit-taking and stop-loss selling pressure increase. The more active and thorough the turnover, the more effectively the selling pressure is cleaned out, and the average cost of holders rises, reducing the selling pressure on the way up.

Another phenomenon worth studying: after a significant rise, the turnover rate drops while the stock price fluctuates with the market. This is common now, especially in growth stocks, indicating that a large amount of chips has been locked in, and the big players are operating for the long term. Over time, the stock will likely move higher again.

Finally, my advice is: volume increase at low levels is worth paying attention to; volume increase at high levels during a decline I personally wouldn’t participate in, especially not catching falling knives during continuous drops. Even if you like a stock, wait until it stabilizes before entering from the right side. Don’t fight the trend—that’s my respect for the market. When used properly, the turnover rate tool can help you avoid many pitfalls. I hope everyone can truly master this concept.