I just realized a problem: many people have been trading stocks for years, but they don't have a deep understanding of the turnover rate of stocks. To be honest, if you haven't understood this concept thoroughly, watching more candlestick charts is pretty much useless.

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 trading volume 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%. The higher this number, the more frequently the chips are changing hands, and the underlying logic is that buyers and sellers are competing with each other.

I’ve noticed that many people only focus on the stock price when looking at stocks, but ignore the signal given by the turnover rate. In fact, by observing changes in the turnover rate, you can see what the main players are doing. A low turnover rate (below 3%) indicates little attention, with both bulls and bears holding similar opinions, so the stock price generally remains in its original trend. But when the turnover rate suddenly rises to between 3% and 7%, that’s worth paying attention to, as it indicates capital is starting to move.

Even more interesting is that the meaning of the turnover rate varies at different positions. I’ve summarized a few key ranges: stocks with volume at the bottom and sufficient turnover, showing clear signs of new capital entering, with relatively large potential for future gains; stocks with volume at high levels and a sudden spike in turnover rate, which might actually be the main players offloading, so caution is needed. My experience is that high turnover at low prices is the most worth paying attention to because it indicates someone is quietly building a position, whereas high turnover at high prices should raise alarms.

To identify the actions of the main players, the turnover rate is the best tool. For example, if a stock’s turnover rate remains high and the price keeps rising, it indicates the main players are gradually pushing the price up while absorbing shares, thoroughly clearing out selling pressure, which leaves more room for future growth. Conversely, if the price rises sharply and the turnover rate suddenly spikes, it’s often a sign of “massive volume at sky-high prices,” meaning the main players are distributing their holdings.

Another very important situation is when the turnover rate stays extremely low for several consecutive days (for example, weekly turnover below 2%). This often indicates the stock has entered a bottoming phase, with both bulls and bears waiting on the sidelines. Once good news arrives, a reversal to the upside is very likely.

In short, learning to read the turnover rate is like learning to read people. Stocks with sufficient turnover and rising prices indicate that the big players are deeply involved; stocks that surge sharply and then see the turnover rate fall back, fluctuating with the market, suggest the chips are locked in, and the main players are making long-term moves. As for cases where the turnover rate spikes but the stock price doesn’t move much, it’s usually someone conducting pre-arranged exchanges within certain zones, which is also worth studying.

My advice is: when analyzing stocks, don’t just look at whether the price is cheap or expensive; pay more attention to what the turnover rate is doing. Stocks with ample turnover at low prices are often opportunities; stocks suddenly volume up at high prices are often traps. Once you understand the logic behind stock turnover, your trading success rate will improve significantly.