# Turnover

Turnover is the number of shares traded over a period, or that trading volume expressed as a percentage of shares outstanding or free float.

## What it means

A stock's turnover describes trading activity during a stated period, such as one trading day. The word has two common meanings: **share turnover** is the number of shares traded, while a **turnover ratio** compares that number with a share count. Always check which meaning a data source uses.

The denominator for a turnover ratio may be total shares outstanding or free float—the shares available for public trading. These produce different percentages, especially when a large portion of a company's shares is closely held. Dollar turnover is different again: it is the value of shares traded, measured in currency rather than shares or percent. Turnover here refers to trading in one stock, not portfolio turnover, which measures changes in portfolio holdings.

## How it is calculated

For a single day, share turnover is daily trading volume. For a ratio, choose a period and use a denominator measured on a consistent basis:

`Turnover ratio (%) = (shares traded during period / shares outstanding or free-float shares) × 100`

- **Shares traded during period:** reported trading volume over the chosen day, week or other period, in shares. Add daily volumes if calculating a multi-day total.
- **Shares outstanding:** all issued shares currently held by investors, in shares.
- **Free-float shares:** the subset generally available for public trading, in shares. State whether this or shares outstanding is the denominator.

The numerator and denominator both use shares, so the ratio is a percentage. Dollar turnover can be approximated as `shares traded × volume-weighted average price`, giving a currency amount for the same period. A quoted *turnover rate* may instead be an average daily ratio; it should not be confused with a multi-day total.

## Worked example

Assume a hypothetical US stock trades **200,000 shares** in one day. It has **10 million shares outstanding**, including **8 million free-float shares**. Suppose its volume-weighted average price that day is **US$50**.

1. Share turnover is **200,000 shares for the day**.
2. Turnover relative to shares outstanding is `200,000 / 10,000,000 × 100 = 2%` for that day.
3. Free-float turnover is `200,000 / 8,000,000 × 100 = 2.5%` for that day.
4. Dollar turnover is `200,000 × US$50 = US$10 million` for that day.

These figures describe the same hypothetical trading day, but answer different questions. The 2% and 2.5% ratios differ because their denominators differ; neither means that exactly that percentage of individual shareholders changed their holdings.

## Why it matters before you trade

Turnover provides context for an intended order's size. An order for 20,000 shares alongside 200,000 shares of daily volume would equal **10% of that day's volume**. That is an order participation calculation, not a turnover ratio: its denominator is shares traded, not shares outstanding or free float.

Higher observed turnover can indicate more trading activity, but it does not establish that a particular order can be filled promptly at a particular price. Volume can cluster at certain times, reflect a one-off event or occur across prices away from the current quote. Bid-ask spread, market depth, volatility and the size and timing of an order also matter. Historical turnover may not represent liquidity when an order reaches the market.

## How PreTrAIde uses it

PreTrAIde does not list a standalone stock-turnover ratio among its stated quantitative outputs. Its pre-trade analysis instead uses market-volume data to calculate an intended stock order's participation in daily volume, alongside estimated bid-ask spread, market impact and liquidity scoring and tiering. This relates the proposed quantity to observed trading activity without treating a turnover ratio as a guarantee of execution.

For a basket, PreTrAIde returns a GO, NO-GO or MODIFY verdict for each line and the basket, with a risk assessment, suggested execution strategy and plain-language reasoning. These verdicts support a decision; PreTrAIde does not place orders or act as an investment adviser.

## Common mistakes

- **Omitting units or the period:** 200,000 shares per day, US$10 million per day and 2% per day are not interchangeable.
- **Mixing denominators:** outstanding-share turnover and free-float turnover can differ substantially.
- **Treating turnover as depth:** past trades do not show how many shares are available near a quoted price now.
- **Confusing stock and portfolio turnover:** one measures a stock's trading activity; the other measures changes in investment holdings.
- **Treating a multi-day total as an average daily figure:** state both the measurement period and whether the figure is a total or an average.

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Source: https://pretraide.com/glossary/turnover