Stock trading must-know: What are the bid and ask volumes? A comprehensive guide to understanding the practical application of bid-ask ratio

Why Is It Important to Understand Inner and Outer Plates?

When you open a stock trading software, besides basic data like opening price, highest price, and lowest price, you’ll also see an important indicator combination—Inner and Outer Plates, as well as the commonly mentioned Inner-Outer Plate Ratio. Many novice investors feel confused by these indicators, but they are actually key to understanding the changes in market buying and selling forces. Mastering the meaning of inner and outer plates can help you quickly judge short-term capital flow trends and market sentiment turning points.

The Essence of Inner and Outer Plates: Who Is Driving the Trading?

To understand inner and outer plates, first, you need to know that there are two types of quotes in stock trading: the “ask price” from sellers and the “bid price” from buyers.

When a stock price trades at the bid price, this transaction is recorded as an Inner Plate—representing sellers actively lowering prices to match buyer orders. The more aggressive the sellers, the stronger the bearish sentiment, which is usually a bearish signal.

Conversely, when a stock trades at the ask price, this transaction is recorded as an Outer Plate—indicating buyers are willing to pay higher prices. The more proactive the buyers, the more it reflects bullish intent, generally seen as a bullish signal.

For example: A stock has a bid of 1000 yuan/500 lots and an ask of 1005 yuan/300 lots. If an investor wants to sell immediately and places an order at 1000 yuan to sell 100 shares, this 100 shares count as Inner Plate; if another investor wants to buy immediately at 1005 yuan and the order fills for 80 shares, this 80 shares count as Outer Plate.

How to Interpret the Five Levels of Quotation?

Open any brokerage app, and the first thing you’ll see is the Five-Level Quotation, but most retail investors don’t know what they represent.

The five levels consist of buy and sell orders. The left side shows the Top Five Bids (usually in green), displaying the highest five bid prices and their quantities; the right side shows the Top Five Asks (usually in red), displaying the lowest five ask prices and their quantities.

For example, “Bid One” shows the highest bid in the market, and “Ask One” shows the lowest ask. The difference between Bid One and Ask One is called the Spread or Bid-Ask Difference.

Note that the five levels only represent pending orders; they do not necessarily execute—orders can be canceled at any time.

How to Calculate and Use the Inner-Outer Plate Ratio?

Short-term investors are most concerned with whether the transaction volume falls on the Inner Plate or Outer Plate, which involves calculating the Inner-Outer Plate Ratio:

Inner-Outer Plate Ratio = Inner Plate Volume ÷ Outer Plate Volume

Depending on the ratio, the meaning varies:

Ratio > 1: Inner Plate volume exceeds Outer Plate volume, indicating strong market bearish sentiment, with sellers actively lowering prices—considered a bearish signal.

Ratio < 1: Inner Plate volume is less than Outer Plate volume, indicating bullish sentiment dominates, with buyers eager to enter—generally a bullish signal.

Ratio = 1: The buying and selling forces are balanced, and the market is in stalemate; the future trend is uncertain, requiring more clear signals.

Practical Application: How to Flexibly Use the Inner-Outer Plate Ratio?

Simply looking at the ratio number isn’t enough; it should be combined with price trends, volume, and order book structure for comprehensive judgment:

Scenario 1: Outer Plate > Inner Plate, and Price Rises
Buyers actively enter and push up the price, a healthy bullish signal. If volume also increases, the upward momentum is stronger, and the short-term bullish trend can continue.

Scenario 2: Inner Plate > Outer Plate, and Price Falls
Sellers actively offload and drive the price down, a healthy bearish signal. If volume increases, the downward pressure becomes even heavier.

Scenario 3: Outer Plate > Inner Plate but Price Moves Sideways or Falls, with Irregular Volume
Beware of “trap of false bullishness.” Major players may deliberately pile up buy orders to attract retail follow-in while secretly selling off. Typical signs include stagnant prices, significantly higher outer plate than inner plate, but increasing sell orders at levels 1 to 3, followed by a sudden plunge.

Scenario 4: Inner Plate > Outer Plate but Price Rises or Stays Flat, with Fluctuating Volume
Watch out for “trap of false bearishness.” Major players may deliberately place buy orders to attract retail selling, while secretly accumulating shares. Features include slight price increases, inner plate larger than outer plate, but persistent accumulation of buy orders at levels 1 to 3, eventually leading to continued price rise and retail investors getting caught.

Scenario 5: Inner Plate > Outer Plate but Price Later Rises
This situation can also occur in actual trading because price movement is influenced not only by volume but also by market sentiment, news, and fundamentals. It reminds investors not to rely solely on one indicator.

Interaction with Support and Resistance Zones

The essence of technical analysis is observing the interaction between price and volume, and the appearance of support and resistance zones is often closely related to the inner-outer plate ratio.

Formation of Support Zone

Although a larger inner plate indicates sellers are eager to sell, when the price reaches a certain level and stops falling, it shows there are many buyers willing to step in at that price—this is the formation of a Support Zone. These buyers believe the price is cheap enough and expect a rebound, so they consider entering long positions.

Formation of Resistance Zone

Conversely, when the outer plate exceeds the inner plate, indicating strong buying interest, but the price cannot push higher and gets stuck at a certain level, this is a Resistance Zone. Resistance zones often form after a stock declines from a high level—those who bought at high prices are reluctant to sell at a loss. When the price rebounds near this level, they start selling to cut losses. As selling pressure increases, fewer buyers are willing to step in, eventually forming a solid resistance line.

Advantages and Disadvantages of Inner and Outer Plates

Advantages

Real-time: Data updates simultaneously with transactions, reflecting the attitudes of both sides as quickly as possible.

Simple concept: No complex calculations needed, easy for beginner investors to grasp quickly.

Supporting tool: When combined with order book data and volume, it can significantly improve short-term trend judgment accuracy.

Disadvantages

Susceptible to manipulation: Major players can create false signals through “placing orders—executing—canceling” tricks. Relying solely on this can mislead retail investors.

Short-term only: Inner and outer plates reflect only current trading behavior and cannot predict medium- or long-term trends.

Requires multiple indicators: Using only this indicator can be misleading; it must be combined with volume, technical analysis, and fundamentals for reliable judgment.

Conclusion

Inner and Outer Plates are important indicators to measure the buying and selling forces in the market. When inner plate volume exceeds outer plate, it indicates strong selling pressure and a higher chance of price decline; when outer plate volume exceeds inner plate, it suggests strong buying interest and a higher probability of price rise.

However, financial investment should never rely on a single indicator. The inner-outer plate ratio, support and resistance zones, volume, and other technical indicators are just tools. It’s also essential to consider the company’s fundamentals, industry outlook, and macroeconomic environment to truly improve trading success. Continuous learning, disciplined trading, and risk management are the fundamental ways for investors to go further.