Turnover
How often does a strategy replace its positions, and what does that churn quietly cost over time?
In plain words
Turnover measures how frequently a strategy sells what it holds and buys something else, usually as a share of capital replaced per period. High turnover means positions change often; low turnover means holdings are kept longer. It matters because each trade carries costs that add up.
Why it matters
Every rotation pays a spread, a fee, and often a funding payment while a position is open. Those costs reduce returns whether the trade helps or hurts, so a fast strategy needs larger edge per trade than a slow one to end up ahead after costs.
In a real week: BTC, week of 24 May 2021
In the week of 24 May 2021, BTC traded in a 22.36% range with a realised volatility of 117.9% a year and a largest one-hour move of 4.47%, on dollar volume of 29.22bn. A strategy replacing positions repeatedly during such a week would face that spread and move risk on every rotation, while funding averaged 0.0078% per eight hours as an ongoing holding cost.
A common mistake
Judging turnover only by how many trades were made. What matters is how much capital changed hands relative to the position, because a small position traded many times may still cost less than one large switch.