[Red Envelope] Invest with sharp eyes, see through the main players' full set of moves! The ultimate use of turnover rate

Turnover Rate is one of the most genuine and least deceptive core indicators in A-shares technical analysis. It reflects the activity level of funds and the efficiency of chip exchange better than trading volume. It is a key tool for judging the behavior of major players, trend strength, and buy/sell points. [Taogu Ba]

Let’s uncover its mystery from basic definitions to practical skills. There is a lot of content, so it’s recommended to save and review repeatedly.

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1. Core Basics of Turnover Rate: Understand “What it is and How to Calculate”

Basic Definition: Turnover Rate = Daily Trading Volume ÷ Circulating Shares × 100%. It reflects the proportion of circulating chips exchanged in a single day. The higher the value, the more active the chip exchange and the greater the market attention; the lower the value, the calmer the trading and the less attention from funds.

Core Logic: Trading volume only shows “how much,” while turnover rate shows “how often” the exchange occurs. For example, large-cap and small-cap stocks with the same trading volume can have vastly different turnover rates. Turnover rate can eliminate the interference of share size and accurately compare the activity levels of different stocks, making it more practical than just volume.

Basic Numerical Divisions

<1%: Extremely low, commonly called “zombie stocks,” with no fund interest, mostly declining or sideways, with no trading value;

1%-3%: Moderate trading, normal fluctuation range, mostly retail trading, no major actions by big players, trend mainly oscillates;

3%-7%: Relatively active, signs of fund involvement, possibly main force testing the waters, absorbing chips, or initial rally, trend begins to show direction;

7%-15%: Highly active, dominated by major funds, likely in a main upward wave, distribution, or strong shakeout, a key short-term focus area;

15%-25%: Extremely active, often hot stocks or “monster stocks,” or major force aggressively distributing chips, with both risks and opportunities, requiring position judgment;

>25%: Massive turnover, an extreme market signal, either new stocks opening or monster stocks topping out, or main force liquidating, likely at a peak.

2. Practical Application of Turnover Rate: Different Signals at Different Positions

The significance of turnover rate must be considered in relation to stock price position. The same turnover rate can signal completely different things at low, middle, or high positions—this is a common pitfall for beginners.

1. Low Position, Low Turnover Rate: Bottom Building, Main Force Absorbing Chips

Technical Features: Stock price has fallen long-term (more than 30%), sideways at low levels, with turnover rate maintained at 1%-3%, occasionally dropping below 1%;

Core Logic: Downward momentum exhausted, retail investors have cut losses, no selling pressure, main force quietly absorbing chips, unwilling to push prices higher to avoid high costs;

Technical Signal: Continuous shrinking volume and turnover at low levels = bottom confirmation. Once volume and turnover increase (break above 3%), it signals a start-up phase.

2. Low Position, High Turnover Rate: Volume Expansion at Bottom, Start or Testing

Technical Features: After sideways movement at low levels, suddenly single-day turnover exceeds 7%-15%, with the stock closing higher (positive candle), and volume increasing simultaneously;

Core Logic: Main force has finished absorbing chips and begins to push higher or tests selling pressure, funds start to chase;

Technical Signal: Low position, high turnover + positive candle = strong start-up signal, suitable for short-term follow-up; if high turnover results in a negative candle, it’s often a test, and a pullback to buy at lower levels is advisable.

3. Middle Position, High Turnover Rate: Continuation of Main Uptrend, Strong Shakeout

Technical Features: Stock price rises 10%-20% from lows, enters mid-range oscillation, turnover rate remains at 7%-15%, stock price does not fall but rises, or slightly retraces then rebounds quickly;

Core Logic: During the upward push, main force uses high turnover to shake out profit-taking retail investors, replace chips, and raise the average cost, easing the pressure for subsequent rises;

Technical Signal: Middle-range high turnover + stock price stays above 5/10-day moving averages = continuation of main upward wave, a signal to add or hold, not a top.

4. High Position, High Turnover Rate: Main Force Distributing Chips, Warning of Top

Technical Features: Stock has surged significantly (more than 50%), at a high level, with turnover rate suddenly soaring above 15%, even breaking 25%, with long upper shadows or large bearish candles;

Core Logic: Main force leverages high popularity to aggressively distribute chips, retail investors buy in, chips flow from main force to retail, forming a top;

Technical Signal: High-level massive turnover + bearish candle = liquidation signal. Even if there is a rebound later, it’s often a trap, and exiting is recommended.

5. High Position, Low Turnover Rate: No-Volume Decline, Main Force Locking and Distributing

Technical Features: After peaking at high levels, stock price slowly declines, turnover rate drops back to 1%-3%, seemingly without selling pressure, but in fact, it’s a continuous decline;

Core Logic: Main force has completed most of its distribution, remaining chips are dumped at any cost, retail investors are unwilling to buy, forming a “no-volume decline”;

Technical Signal: High-level shrinking decline = continuation of downward trend, do not bottom fish; the bottom is far from coming.

3. Advanced Techniques for Turnover Rate: Precise Use with Trends, Volume-Price, and Sector

1. Combining Moving Averages: Turnover Rate + Moving Averages to Judge Trend Strength

If the stock price stays above 5/10-day moving averages and turnover rate remains at 3%-7%: strong upward trend, mainly holding, buy on dips near moving averages;

If the stock price breaks below 5/10-day moving averages and turnover rate suddenly enlarges: a breakdown signal, main force fleeing, cut losses decisively;

If the moving averages are in a bullish arrangement (5-day > 10-day > 20-day) and turnover rate gradually increases: trend acceleration, a sign of a coming main upward wave.

2. Combining Volume and Price: Turnover Rate + Volume-Price Relationship to Identify Fake Breakouts

True Breakout: Stock price breaks previous high, turnover rate increases simultaneously (above 7%), volume and price rise together, active turnover indicates a valid breakout;

False Breakout: Stock price breaks high but turnover rate shrinks (below 3%), rise with low volume, likely to fall back later, breakout invalid.

3. Combining Sector and Stocks: Sector Turnover > Individual Stock Turnover to Judge Leading Stocks

In hot sectors, if a stock’s turnover rate exceeds the sector average and the stock gains the most: this stock is likely the sector leader, with the highest fund concentration, prioritize leading stocks;

If the overall sector turnover is low (below 3%), even if individual stocks have high turnover, it’s an isolated move with poor sustainability, avoid chasing high.

4. Special Rules for New and Sub-new Stocks

Before 5 days of listing, no price change, turnover rate standards differ:

First-day turnover 40%-60%: normal absorption, main force involved, subsequent trend likely;

First-day turnover below 30%: insufficient absorption, retail investors hesitant to sell, risk of delisting or initial decline;

First-day turnover above 70%: excessive chip exchange, main force distributing, likely to open lower the next day.

Sub-new stocks (listed 1-3 months): turnover rate at 10%-20% is normal; if it drops below 5%, indicates capital retreat and entering consolidation.

4. Turnover Rate Pitfall Avoidance: 3 Common Mistakes for Beginners

1. Only look at the number, ignore position: high turnover at low levels is an opportunity; high turnover at high levels is a trap. Ignoring position makes turnover meaningless.

2. Relying on single-day turnover to judge trend: a single day of high turnover may be abnormal; confirmation requires 2-3 days of sustained high turnover.

3. Ignoring share size: large-cap stocks (market cap over a trillion) with 3% turnover are active; small-cap stocks (market cap below 10 billion) need 10%+ to be considered active. Adjust standards based on share size.

Turnover rate is the language of chips that the main force cannot hide. Low turnover at lows is absorption, mid-high turnover is shakeout, high turnover at highs is distribution. The combination of position and turnover forms the complete code of main force behavior.

Don’t blindly trust a single number, and don’t detach from the trend. Combine turnover with volume-price, moving averages, and position to see through the true intentions of funds—lurking during absorption, holding during shakeout, holding during rally, and exiting during distribution.

Stock market game is fundamentally a contest of chips and human psychology. Understanding turnover rate is the key to following main force and navigating bull and bear markets.