Recently, I found that many investors actually don't understand how to interpret turnover rate, which is a big problem. I’ve organized my practical experience over the years and hope to help everyone.

Let's start with the basics. The turnover rate is actually the frequency of stock trading, reflecting how active this stock is. Think about it: if a stock trades 10 million shares in a month, and the total share capital is 100 million shares, then the turnover rate is 10%. This indicator can help you judge whether a stock is obscure or popular.

But the key is, how to interpret the turnover rate to truly understand the intentions of the main players? I think this is what most people are missing.

A turnover rate below 3% indicates little attention from the market, and no big institutions are involved. Between 3% and 7%, people start to tentatively build positions, and the stock begins to show some vitality. From 7% to 10%, this already indicates a strong stock, showing that market attention has increased.

What’s really interesting is the 10% to 15% range. At this stage, the main players are usually trying to control the stock, increasing their accumulation efforts. Once they have gathered enough chips, a rally is not far off. In practical experience, I found that if the stock price is still low at this point, it often signals a bottom with volume, and the subsequent rise can be quite substantial.

A turnover rate of 15% to 20% should raise caution. If it’s volume at a low position, it might be a prelude to a move; but if it’s volume at a high position with a decline, then be careful. Between 20% and 30%, the battle between bulls and bears is especially fierce. At a low position, the main players might be aggressively accumulating, trying to attract retail investors by creating active trading. But don’t be scared by large orders; now smart main players split big orders into small ones to sell slowly—reducing costs and preventing retail investors from panicking and selling off.

A turnover rate above 30% requires extra caution. Such levels usually only appear in hot stocks with particularly attractive themes. Between 40% and 50%, attention is already off the charts, with large price swings that most people can’t hold through, making the risk extremely high. Over 50%, it gets even crazier—buyers and sellers look down on each other. But if this occurs at the bottom, it could be a sign of a sudden major positive event; if at the top, then caution is needed.

My personal experience is that how to interpret the turnover rate is most important when combined with the stock’s price position. Low position with high turnover rate indicates new funds entering, usually meaning larger upward potential. High position with high turnover rate often indicates the main players are unloading, especially when the stock price has moved far away from the cost basis of the big players’ accumulation. We often say “sky-high volume, sky-high price,” referring to this situation.

Another very important point: if a stock has a very low turnover rate but the price keeps rising, it indicates that medium- to long-term main players are operating, and such stocks tend to be more sustainable with lower risk. Conversely, if a stock is moving downward with very low turnover, especially those that had previous accumulation by big players, and after some shakeouts, this situation appears, it’s a sign that the stock is already in the bottom zone.

In practical experience, I’ve summarized a few points. First, a turnover rate below 3% is very common and usually indicates no large funds are involved. Between 3% and 7%, the stock enters a relatively active state and is worth watching. A daily turnover rate of 7% to 10% in strong stocks often indicates widespread market attention. If the daily turnover reaches 10% to 15% and is not in a historical high zone, it signals that a strong institutional operation is underway.

Also, pay special attention to stocks with consistently high turnover and increasing price and volume. This shows that the big players are deeply involved. As the stock price rises, profit-taking and stop-loss selling pressure will increase. The more active and thorough the turnover, the more thoroughly the selling pressure is washed out, and the average cost of holders rises, making subsequent upward moves easier with less selling resistance.

Another common phenomenon is that after a significant rise, the turnover rate suddenly drops, and the stock price fluctuates with the market. This usually occurs in growth stocks, indicating that a large amount of chips has been locked in. The big players are operating long-term, and over time, the stock will continue to climb.

Finally, I want to mention that a surge in turnover with little price fluctuation is also worth studying. This often indicates a large amount of chips changing hands within a specific small range, often pre-arranged, and there may be stories behind it that you don’t know.

In summary, volume increase at low positions with rising prices is worth attention; volume increase at high positions with falling prices I personally wouldn’t get involved in. When I like a stock, I also wait until it stabilizes before entering from the right side. This is not cowardice but respect for the trend. Learning how to interpret the turnover rate, combined with the stock’s position and other indicators, can help you better identify the actions of the main players and avoid getting trapped.