In-depth analysis of internal and external markets: The key indicator to grasp the buying and selling momentum in the stock market

When investing in stocks, besides the open, close, high, and low prices on the chart, do you notice the data of “inner盘” and “outer盘”? Many investors are both familiar and unfamiliar with these concepts. They often hear seasoned traders discuss how the “inner and outer盘 ratio” can be used to judge short-term trends, but they are unclear about the specific meaning. In fact, the meaning of inner and outer盘 lies in distinguishing who is actively driving the transactions — they are important windows for observing market buying and selling strength and tracking the movement of major funds.

Understanding Inner and Outer盘 Starting from Active Buying and Selling

In the stock market, there are two types of trading methods: “order placement” and “real-time transactions.” The core of inner and outer盘 is to determine 【who is actively executing trades】.

Before a transaction, the seller hopes to raise the price (ask price), while the buyer hopes to lower the price (bid price). When an actual transaction occurs:

Price transacts at the bid price — sellers accommodate buyers, willing to lower the price to exit; these transactions are recorded as “inner盘,” reflecting sellers’ urgency, and are considered a bearish signal.

Price transacts at the ask price — buyers accommodate sellers, willing to raise the price to buy; these transactions are recorded as “outer盘,” reflecting buyers’ active attitude, and are considered a bullish signal.

For example, in TSMC’s order book: if the bid side shows 1160 yuan / 1415 lots, and the ask side shows 1165 yuan / 281 lots, an investor sells 50 lots directly at 1160 yuan, which counts as inner盘; if they buy 30 lots directly at 1165 yuan, that counts as outer盘.

Level 5 Quotes and Order Book Structure

Open your broker app, and the first thing you see is the “Level 5 Quote” — a real-time quote table composed of the top five bid and ask orders. The left side (usually green) shows the top five bid orders with the highest prices, and the right side (usually red) shows the top five ask orders with the lowest prices. For example, a bid of 203.5 yuan / 971 lots indicates the highest bid in the market is 203.5 yuan with 971 lots pending.

Note that Level 5 quotes only display pending orders; they are not executed trades and can be withdrawn at any time.

Interpreting Inner and Outer盘 Ratios: Judging Buying and Selling Strength

The key to short-term trading is tracking the inner and outer盘 ratio — that is, the ratio of inner盘 to outer盘. The calculation formula is simple:

Inner and outer盘 ratio = Inner盘 volume ÷ Outer盘 volume

Ratio > 1: Inner盘 volume exceeds outer盘 volume, indicating a strong bearish sentiment, sellers are willing to cut prices, which is a bearish signal.

Ratio < 1: Inner盘 volume is less than outer盘 volume, indicating bullish sentiment, buyers are willing to chase prices, generally a bullish signal.

Ratio = 1: The buying and selling forces are balanced, the market is stalemated, and the future trend is uncertain.

Practical Application and Traps

Inner and outer盘 ratios have advantages — they are real-time, simple to understand, and can assist in order book analysis. But the real challenge lies in the manipulation techniques of major players:

Outer盘 > Inner盘 and price rising — buyers actively enter to push prices higher; this is a healthy bullish signal. If volume increases simultaneously, the short-term upward momentum is even stronger.

Inner盘 > Outer盘 and price falling — sellers actively sell off, driving prices down; this is a healthy bearish signal.

However, beware of “false bullish” and “false bearish” signals. A false bullish pattern occurs when outer盘 > inner盘 but the price stagnates or even declines; at this point, major players may be placing sell orders at levels 1 to 3 to induce retail investors to buy actively, then secretly sell off. Conversely, a false bearish pattern occurs when inner盘 > outer盘 but the price rises, with buy orders 1 to 3 continuously stacking, indicating that major players are inducing retail investors to sell, secretly accumulating funds.

Support and Resistance Zones Judgment

Combining inner and outer盘 ratios with support and resistance zones yields better results. When the stock price drops to a certain level and “won’t go down,” it indicates sufficient buying support — this is a support zone, and investors may consider going long. Conversely, if strong buying cannot push the price higher and it gets stuck at a certain level, this forms a resistance zone. Resistance zones are often created by trapped investors at high levels; once they see the price approaching their break-even point, they tend to sell off quickly.

Practical tip: When a stock is within a support or resistance zone, you can operate with a buy low, sell high approach — buy at support, sell at resistance. But if the price breaks below support or above resistance, it often signals a trend change, and a subsequent one-way move may follow until hitting the next key level.

Limitations of Inner and Outer盘 Indicators and Complete Strategies

Although inner and outer盘 reflect transaction behavior in real-time, they have obvious limitations. They are susceptible to manipulation by major players, only reflect short-term trends, and can be distorted if used alone. Therefore, in actual trading, they should be combined with volume analysis, technical indicators, and fundamental analysis.

Stock market investment ultimately involves the mutual verification of “price” and “volume.” Inner and outer盘 ratios are just one part of technical analysis; true profitability also depends on the company’s fundamentals, overall economic cycles, and market sentiment. Understanding the meaning of inner and outer盘, grasping their operational logic, and implementing solid risk management are the foundations for stable profits.