Recently, many novice investors have been a bit confused by the data on trading software, especially the question of what the internal and external plates are, which is frequently asked. Actually, these two indicators may seem complicated, but once understood, they are really helpful for judging short-term buying and selling momentum.

In simple terms, the essence of the internal and external plates is to distinguish who is actively driving the transactions. When the stock price trades at the bid price, this transaction is recorded as the internal plate, indicating that sellers are more eager to sell; conversely, if the trade occurs at the ask price, it is the external plate, showing that buyers are willing to chase the price. So what are the internal and external plates? They are tools used to observe the comparison of bullish and bearish forces in the market.

For example, suppose the bid price is 1160 yuan with 1,415 lots, and the ask price is 1165 yuan with 281 lots. If someone is eager to sell and directly sells 50 lots at 1160, these 50 lots count as the internal plate; on the other hand, if someone is eager to buy and directly buys 30 lots at 1165, these 30 lots are the external plate.

Next, the five-level quotes are actually a combination of internal and external plates. When you open your broker app and see that screen, the green on the left is the top five bid levels (the five highest bid prices), and the red on the right is the top five ask levels (the five lowest ask prices). These are just order placements, not necessarily executed trades.

How to interpret the internal and external plate ratio? It is calculated by dividing the internal plate transaction volume by the external plate transaction volume. A ratio greater than 1 indicates that the internal plate volume is larger, suggesting a strong bearish sentiment, with sellers pushing the price down—this is a bearish signal; a ratio less than 1 indicates that the external plate volume is larger, with buyers chasing the price—usually a bullish signal; a ratio equal to 1 means a stalemate between bulls and bears.

However, the internal and external plates are only part of technical analysis. In actual application, they should be combined with the stock’s price position, trading volume, and order book structure for more accurate judgment. For example, if the external plate volume is greater than the internal but the stock price does not rise and instead falls, with volume fluctuating wildly, it may indicate that the main players are placing sell orders to lure in buyers while secretly offloading shares. Conversely, if the internal plate volume exceeds the external but the stock price rises, it could mean that the main players are placing buy orders to lure in short-sellers and secretly accumulating shares.

Another important concept is support and resistance zones. When the stock price drops to a certain level and cannot go lower, it indicates that there are buyers willing to buy at that level—this is a support zone, and you might consider going long; conversely, if buying pressure is strong but the price is blocked at a certain level, that is a resistance zone, and you might consider shorting. The suggestion is to operate within these zones—buy at support, sell at resistance.

The advantage of internal and external plates is that they update quickly, are simple concepts, and can assist in analyzing order book structure. But their obvious drawbacks are: they can be manipulated by major players, are only useful for short-term analysis, and can be distorted if used alone. Therefore, they should be combined with trading volume, technical indicators, and fundamental analysis.

Honestly, no single indicator can do everything in investing. Internal and external plates are just tools in technical analysis. It’s still essential to consider company fundamentals and the overall economic environment, doing thorough research to improve your chances of success.