What does a higher foreign volume than domestic volume indicate? Master the trading secrets of stock internal and external volumes in one go.

At first glance, the numbers on the order book seem simple, but behind them lie the true intentions of market participants. When the outer market (外盤) is greater than the inner market (內盤), it straightforwardly indicates that buyers are chasing prices, and understanding this logic is worth every trader’s deep consideration.

Understanding Inner and Outer Markets Through Transaction Logic

In stock trading, buyers and sellers are always competing. On the order book, you see bid prices and ask prices — sellers want to push the price higher, buyers want to push it lower. But actual transactions occur when one side actively compromises.

When a trade occurs at the bid price, it means the seller is willing to sell at the buyer’s price; these transactions are recorded as inner market (內盤). A higher inner market suggests sellers are more eager, indicating selling pressure.

When a trade occurs at the ask price, it means the buyer is willing to buy at the seller’s price; these are recorded as outer market (外盤). An outer market larger than inner market indicates strong buyer chasing, and a bullish market sentiment.

For example: TSMC quotes a bid of 1160 yuan (1415 lots) and an ask of 1165 yuan (281 lots). An investor sells 50 lots directly at 1160 — this is an inner market transaction; if they buy 30 lots directly at 1165, that’s an outer market transaction.

The Five-Level Quote as a “Window” into the Order Book

The five-level quote shows the most immediate buy and sell intentions in the market. The left side (green) displays the top 5 bid prices, representing the highest bid orders; the right side (red) shows the lowest ask prices, representing the top 5 ask orders.

However, note that the five-level quote only reflects pending orders; these orders can be withdrawn at any time and may not result in actual trades. Therefore, there is a “perception gap” between orders and actual transactions, which is a common source of market deception.

How to Interpret the Inner and Outer Market Ratio Without Falling into Traps

Inner-outer market ratio = Inner market volume ÷ Outer market volume

Ratio > 1: More inner market activity, sellers are dominant, market sentiment is bearish, a risk signal;
Ratio < 1: More outer market activity, buyers are dominant, market sentiment is bullish, an opportunity signal;
Ratio = 1: Balanced forces, market is stalemated, direction unclear.

But beware — relying solely on this ratio can be misleading due to traps set by big players.

Fake Bull Trap: Outer market large but price does not rise

This is a common deception. Buyers seem strong (outer market > inner market), but the price stalls or even drops, with volume fluctuating wildly. Behind this, big players may be placing large sell orders at levels one to three, creating a false market impression to lure retail investors into chasing prices, while secretly selling off.

Fake Bear Trap: Inner market large but price does not fall

Conversely, if the inner market is larger than the outer but the price remains steady or rises, with unstable volume, big players might be stacking buy orders at levels one to three, creating a false sense of buying strength to induce retail investors to sell, while they absorb shares.

How to Recognize Healthy Signals

Outer market > inner market and price rising: Buyers are actively pushing the price higher, confirmed by increasing volume — a genuine upward move;
Inner market > outer market and price falling: Sellers are actively unloading, confirmed by increasing volume — a genuine downward trend.

In these situations, the inner-outer market ratio becomes a reliable auxiliary tool.

Support and Resistance Zones Are Key to Trading

The inner-outer market ratio only reflects current buying and selling strength, but price movements often reverse at historical support and resistance zones.

Support zone logic: When the price drops to a certain level and stops falling, it’s because many buyers believe the price is cheap enough to buy in, expecting a rebound. These zones are often good entry points for long positions.

Resistance zone logic: When the price rises and encounters resistance at a certain level, it’s because previous buyers at that level are reluctant to sell at a loss. When the price approaches again, they rush to exit, creating selling pressure that becomes a new resistance.

Practical operations:

• Buy at support zones when the price dips, sell or reduce positions at resistance zones when the price rises;
• Breakthrough of resistance zones signals strength, consider adding positions;
• Falling below support zones may signal a new downtrend, look for the next support level.

Practical Value and Limitations of Inner and Outer Market Data

Advantages:

• Real-time reflection of market urgency and participation
• Simple concept, easy for beginners to understand
• When combined with order structure and volume, can improve short-term judgment accuracy

Limitations:

• Easily manipulated by big players through fake orders (placing and withdrawing orders)
• Only reflects short-term transaction behavior, cannot predict long-term trends
• Relying on it alone can be distorted; must be combined with technical and fundamental analysis

The True Trading Logic

Inner and outer market data are just tools in technical analysis; they should not be used as sole decision-makers. Market trends are influenced by multiple factors: company fundamentals, macroeconomic environment, policy changes, capital flows, market sentiment, etc.

Investors should combine the inner-outer market ratio with support and resistance zones, volume, technical patterns, and also pay attention to company fundamentals and macroeconomic developments to improve trading success rates.

Practicing with a demo account is an effective way to deepen understanding. It allows experiencing real market conditions in a risk-free environment, suitable for beginners and those wanting to test strategies.