Just now while watching the market, I remembered this question again. Many beginners actually don’t understand what the data on trading software really mean. Opening price, high, and low are easy to understand, but as soon as they see terms like "internal volume" and "external volume," they get confused, not to mention "internal vs. external volume ratio." Actually, once you understand these concepts, they can be quite helpful in judging short-term capital flow.

Let's start with the basics. Before a stock transaction, the seller will place a bid to raise the price, and the buyer will place an ask to lower the price. The key is who actively caters to whom. When a trade occurs at the bid price, it’s called "internal volume," indicating that sellers are more eager to unload and are willing to accept the buyer’s price, which is a bearish signal. Conversely, when a trade occurs at the ask price, it’s called "external volume," indicating that buyers are willing to pay more to buy, which is a bullish signal.

Here's a practical example. Suppose the bid order is 1,160 yuan for 1,415 shares, and the ask price is 1,165 yuan for 281 shares. If you want to sell immediately, you can place an order at 1,160 yuan and sell 50 shares; these 50 shares are counted as internal volume. If you want to buy immediately, you place an order at 1,165 yuan and buy 30 shares; these 30 shares are external volume. Internal and external volume are just that simple.

What about the five-level quotes? They are basically the top five bid and ask orders, showing the highest bid prices and the lowest ask prices currently available. Usually, green indicates the buy side, and red indicates the sell side. But be careful—these are just pending orders, not necessarily executed trades. They can be withdrawn at any time.

For short-term traders, the most important thing is the internal-to-external volume ratio. Simply put, it’s the internal volume divided by the external volume. A ratio greater than 1 indicates more internal volume, suggesting high bearish sentiment, with sellers pushing prices down—this is a bearish signal. A ratio less than 1 indicates more external volume, meaning buyers are chasing prices, which is a bullish signal. A ratio equal to 1 indicates a stalemate, a consolidation phase, with unclear future direction.

But be cautious here. A larger external volume than internal volume doesn’t necessarily mean the stock price will rise. Sometimes, big players intentionally place large sell orders to lure retail investors into buying, while secretly offloading shares. You might see the price moving sideways, with external volume clearly higher than internal volume, but the level 1 to level 3 ask orders keep increasing, and then suddenly the price drops. This is a typical "false bullish" signal. Conversely, there are "false bearish" signals too, where big players place buy orders to induce retail investors to sell, then quietly accumulate shares.

Therefore, the internal-to-external volume ratio should be considered together with the stock’s price position, trading volume, and order book structure for better accuracy. When external volume exceeds internal volume and the price is rising with increasing volume, that’s a genuine healthy bullish sign. When internal volume exceeds external volume and the price is falling with increasing volume, that’s a true bearish sign.

Besides observing buying and selling strength, technical analysis emphasizes watching support and resistance zones. When the price drops to a certain level and can’t go lower, that’s a support zone—because many believe the price is cheap enough to buy. Conversely, when the price rises to a certain level and can’t go higher, that’s a resistance zone—usually because those who bought at higher prices don’t want to lose money and start selling when the price approaches that level.

In practice, I often use a strategy of trading within these support and resistance zones. Buy at support, sell at resistance. But if the stock breaks below support or above resistance, it often continues to decline or rise until hitting the next support or resistance level.

The biggest advantage of internal and external volume is its immediacy—it can quickly reflect the active intentions of buyers and sellers during trading. The concept is simple and easy to understand. But the downside is obvious: it can be easily manipulated by big players, and it only reflects current transaction behavior, not long-term trends. Relying solely on the internal/external volume ratio can lead to pitfalls.

In short, internal and external volume are just auxiliary tools in technical analysis. To truly improve your success rate, you need to combine this with trading volume, technical indicators, fundamental analysis, and even the overall economic situation. No single indicator can do everything; this is the experience I’ve accumulated over years of practical trading.