Mastering the Truth Behind Internal vs. External Volume: Complete Interpretation of Stock Order Book Codes

In stock investing, when you open your trading software, what catches your eye isn’t just the basic information like opening price, high, and low, but also a frequently overlooked yet profoundly impactful indicator — Inner and Outer Plates. These seemingly unfamiliar data points actually conceal the true sentiment of buyers and sellers in the market and are the “market whispers” that short-term traders love to observe.

Trading Activity: The Key to Determining Inner and Outer Plates

To understand inner and outer plates, first grasp a fundamental logic: Who actively adjusts to the other’s quote determines whether a transaction belongs to the inner or outer plate.

Before each stock transaction, there are two types of quotes in the market: the seller hopes to raise the transaction price, displaying the “Ask Price”; the buyer hopes to lower the price, displaying the “Bid Price”. The spread between these two reflects market tension.

When an investor decides to sell immediately, submitting an order at the bid price (lower price), it indicates the seller is proactively accommodating the buyer, and this transaction is counted as an Inner Plate, reflecting the seller’s urgency. Conversely, if an investor immediately buys at the ask price (higher price), actively raising the bid to match the seller, this transaction is categorized as an Outer Plate, revealing the buyer’s strong desire.

Simply put: Seller eager to offload → Inner Plate; Buyer eager to chase in → Outer Plate.

Level 5 Quotes: The Market’s Language Every Trader Should Know

Opening your broker app, the five-level quotes are essentially a visual representation of inner and outer plates — the green five-level bid shows the top five buy orders at the highest prices, while the red five-level ask shows the lowest five sell orders.

For example, for a certain stock, the top bid might be 200 yuan/1000 shares, meaning 1000 people are willing to buy at 200 yuan; the top ask might be 201 yuan/800 shares, indicating 800 people are willing to sell at 201 yuan. The one-yuan spread is the frontline of market battle.

But note: The five-level quotes only show order intentions, which can be withdrawn at any time and do not necessarily execute. Smart traders often exploit this feature to create illusions — placing large orders to scare retail investors, then quickly cancel after a transaction.

The Battle Between Bulls and Bears Behind Inner and Outer Plate Ratios

Inner to Outer Plate Ratio = Inner Plate Volume ÷ Outer Plate Volume

This simple formula can reflect the market’s bullish or bearish strength:

Ratio > 1: Inner plate volume exceeds outer plate volume, indicating sellers are more proactive than buyers. The market sentiment is bearish, funds are rushing out, often a precursor to falling prices, signaling weakness.

Ratio < 1: Inner plate volume is less than outer plate volume, showing buyers are more active and willing to chase higher. The market sentiment is bullish, funds are actively entering, often indicating a higher likelihood of rising prices, signaling strength.

Ratio = 1: The buying and selling forces are balanced, the market is in stalemate, and the future direction is uncertain, requiring new signals to break the deadlock.

Practical Application: Inner Plate > Outer Plate Does Not Always Mean Decline

After understanding the concept, the real test is — how to apply these indicators in practice.

Scenario 1: Outer Plate > Inner Plate, and the price rises simultaneously

This is the healthiest bullish signal. Buyers actively enter and successfully push the price higher. If volume also increases, it indicates strong buying momentum, suitable for trend-following strategies.

Scenario 2: Inner Plate > Outer Plate, and the price drops simultaneously

This is the clearest bearish signal. Sellers actively offload, dragging the price down. If volume also increases, it indicates heavy selling pressure, with higher short-term risk, warranting caution.

Scenario 3: Outer Plate > Inner Plate but the price stays flat or drops

Beware here. This could be a “Fake Bullish” tactic — large buy orders are placed to attract retail follow-through, while secretly distributing at high levels. Common scenario: the price consolidates, outer plate looks large, but close observation reveals an increase in sell orders at levels 1-3, followed by a sudden plunge.

Scenario 4: Inner Plate > Outer Plate but the price doesn’t fall or even rises

This is a classic case of “Fake Bearish”. Major players intentionally place buy orders to create a false impression of decline, secretly accumulating at low prices. For example, the price slightly rises, inner plate exceeds outer plate, but buy orders at levels 1-3 keep stacking, and the price continues upward, indicating accumulation at the lows.

Key reminder: Even if the inner plate exceeds the outer plate, the price can still rise later. Because stock movements are influenced not only by active trading but also by market sentiment, major news, and fundamentals. The inner and outer plate ratio is just one technical dimension, not an absolute truth.

Support and Resistance Zones: The Ultimate Use of Inner and Outer Plate Ratios

The true realm of technical analysis lies in understanding support and resistance zones.

When a stock’s price drops to a certain level and then rebounds, unable to go lower, it indicates a support zone. Large buy orders at this level suggest investors see the price as cheap and expect a rebound. When the price hits support, traders may consider establishing long positions.

Conversely, when the price rises to a certain high and repeatedly stalls, unable to break through, it indicates a resistance zone. Resistance often consists of previous high-level buyers who are now trapped — seeing the price near their purchase price, they rush to sell to cut losses, creating heavy selling pressure.

Practical strategy: When a stock consolidates within support and resistance zones, traders can buy near support and sell near resistance. But if the price breaks below support or above resistance, the previous buying or selling pressure is insufficient, and the trend may accelerate downward or upward until encountering the next support or resistance zone.

Pros and Cons of Inner and Outer Plate Data

Advantages

Real-time responsiveness: Inner and outer plate data update simultaneously with transactions, providing the fastest window into market activity.

Easy to understand: No complex calculations needed, suitable for beginners.

A powerful tool for order book analysis: When combined with order structure, volume, and technical analysis, it can significantly improve short-term trend judgment.

Disadvantages

Susceptible to manipulation: Savvy traders can use “placing orders → active transactions → canceling” routines to artificially create false inner and outer plate data, misleading retail investors.

Only reflects current activity: It records immediate transaction behavior and has limited predictive power for medium- and long-term trends.

Can be misleading if used alone: Relying solely on the inner to outer plate ratio without considering volume, fundamentals, or macro environment can lead to false signals. Stocks with a high inner to outer ratio may still fall, and vice versa.

Final Reminder

Inner and outer plates are like an electrocardiogram of the stock market; their rhythm reflects market participants’ sentiment. A larger inner plate than outer plate warrants caution but is not an immediate signal to short. Because the market is also influenced by other factors.

True trading experts do not rely solely on a single indicator. Instead, they combine the inner and outer plate ratio with support and resistance levels, volume, technical analysis, fundamentals, and industry cycles to improve their trading success rate.

Remember: Indicators are just auxiliary tools; the most important thing is to develop your own investment framework and risk management system.