Understanding the Secret of Stock Buying and Selling Momentum: Internal vs External Orders, a Must-Learn for Short-Term Investing

When investing in stocks, besides price movements, there is a set of data that directly reveals the intentions of the market movers—that is, Inner and Outer Plates. Many investors focus on these two numbers but do not understand their true meaning, missing the key signals for judging stock trends. Today, we’ll take you through a practical perspective to thoroughly understand this market psychology.

Who is Driving the Transactions? The Essence of Inner and Outer Plates

When you open a trading software, you’ll see an order book interface. There are two types of participants: one placing “Buy” orders (bid prices), and the other placing “Sell” orders (ask prices). The actual force behind the transactions is the side willing to “compromise.”

Imagine a simple scenario:

• Buyer places an order: 1160 yuan for 1,415 shares
• Seller places an order: 1165 yuan for 350 shares

If someone can’t wait and sells directly at 1160 yuan (matching the buyer), this transaction is recorded as an Inner Plate—indicating the seller is more eager and willing to lower expectations to complete the trade. When the Inner Plate increases, it usually signals rising selling pressure.

Conversely, if someone can’t wait and buys directly at 1165 yuan (chasing the price), this transaction is recorded as an Outer Plate—showing buyers are more eager and willing to pay a premium. An increase in Outer Plate indicates heightened market buying enthusiasm.

In simple terms:

• Increase in Inner Plate = Seller urgency = Bearish signal
• Increase in Outer Plate = Buyer urgency = Bullish signal

The True Meaning of the Five-Level Quote

Open any investment app, and the most prominent feature is the Five-Level Quote—the green buy five levels on the left and the red sell five levels on the right.

The left (buy five levels) shows the top five highest bid prices and quantities in the market; the right (sell five levels) shows the lowest five ask prices and quantities.

For example, the first line shows “Buy 1 at 203.5 / 971 shares, Sell 1 at 204.0 / 350 shares,” meaning the strongest buying interest is at 203.5 yuan, and the weakest selling interest starts at 204.0 yuan.

Key point: These are just order commitments, not guaranteed transactions. Market makers can withdraw orders at any time to create false signals, so relying solely on the five-level quote can be misleading.

The Inner-Outer Plate Ratio: The Balance of Market Power

The core of short-term trading is judging the Inner-Outer Plate Ratio, which indicates who is dominating the transaction flow.

The calculation is simple: Inner-Outer Ratio = Inner Plate Volume ÷ Outer Plate Volume

Based on this ratio, the market can be divided into three states:

Ratio > 1 (Inner > Outer) Inner Plate volume exceeds Outer Plate, indicating higher seller activity. The market sentiment is bearish, with more people willing to sell at lower prices. This is a Bearish Signal. If the stock price is also falling, it confirms that the bears are in control.

Ratio < 1 (Inner < Outer) Outer Plate volume exceeds Inner Plate, showing buyers are actively chasing the price. The market sentiment is bullish, a typical Bullish Signal. Especially when the stock price is rising simultaneously, the bullish momentum is confirmed.

Ratio ≈ 1 (Inner ≈ Outer) Buyers and sellers are evenly matched, and the market is in stalemate. The trend is uncertain; it’s best to wait and see for stronger signals.

How to Use the Inner-Outer Plate Ratio to Judge the True Trend?

Just looking at the ratio alone is not enough because market makers can manipulate the data through order placement and withdrawal to create false signals. True experts analyze the combined information of Inner-Outer Plates, price movements, volume, and order book changes.

Scenario 1: Outer > Inner + Price Rising + Volume Increasing The healthiest bullish signal. Buyers actively push up the price, and volume confirms genuine interest, indicating a real rally. Consider going long.

Scenario 2: Inner > Outer + Price Falling + Volume Increasing A healthy bearish signal. Sellers actively unload and push the price down, with volume supporting the move, indicating a genuine decline. Consider reducing holdings.

Scenario 3: Outer > Inner but Price Not Rising or Falling, Instead Moving Down + Volume Fluctuates Beware of “Trap to Induce Buying.” Market makers may place large buy orders at levels 1-3 to attract retail investors, while secretly selling large amounts at levels 1-3. Once retail investors buy in, the market maker quickly cancels buy orders, causing the price to plunge.

Scenario 4: Inner > Outer but Price Not Falling or Rising, Instead Moving Up + Volume Fluctuates Beware of “Trap to Induce Selling.” Market makers place large sell orders at levels 1-3 to create a false selling pressure, inducing retail investors to sell. Meanwhile, they are actively buying at levels 1-3. After retail investors exit, the market maker cancels sell orders, and the price rebounds.

Remember: Don’t rely solely on the Inner-Outer Plate ratio. Always consider the combination of the ratio, price trend, volume, and order book changes.

Support and Resistance Zones: Advanced Use of Inner and Outer Plates

Besides judging short-term buying and selling strength, it’s important to understand why a stock may stall at certain price levels.

Formation of Support Zones When a stock keeps falling to a certain price and then stops declining, it indicates many investors are willing to buy at that level. They believe the stock is cheap and expect a rebound, so they keep buying. This “support” level absorbs selling pressure, preventing further decline and often leading to a rebound.

Formation of Resistance Zones When buyers push the price higher but get stuck at a certain level, it’s likely that previous holders at that high price are selling to lock in profits. They don’t want to lose money or hold long-term, so when the price approaches, they sell immediately. This “resistance” level prevents the price from rising further, even if buying interest remains high.

Practical Trading Rules

• Near support zone: go long, as strong buying interest increases the chance of a rebound.
• Near resistance zone: go short, as selling pressure is high and a pullback is likely.
• Break below support or above resistance: signals trend reversal, often indicating the start of a larger trend.

Pros and Cons of Inner-Outer Plate Indicators

Advantages:

• Real-time data, synchronized with transactions, quickly reflecting market intentions.
• Simple concept, easy for beginners to understand without complex calculations.
• Effective in practice, especially when combined with order book structure and volume analysis for short-term trend judgment.

Disadvantages:

• Prone to manipulation, as market makers can create false signals by placing and withdrawing orders.
• Short-term focus, only reflecting current transaction behavior, not long-term trends.
• Single indicator limitations, must be combined with volume, technical analysis, and fundamentals to avoid deception.

Final Reminder

Inner and Outer Plates are important windows into market psychology, but investing should not rely on a single indicator. Technical analysis is powerful, but always consider company fundamentals, industry outlook, and the overall economic environment. The data on trading platforms are surface-level; the real winners are those who analyze all information comprehensively and make rational decisions.

Practice with demo accounts to experience the real-time changes in Inner and Outer Plates, accumulating experience more effectively than reading countless articles. Remember: Inner and Outer Plates are speaking; the key is learning to listen.