Recently, while watching the market, I noticed that many beginners are still a bit confused about the concepts of internal and external plates. Actually, understanding the meaning of external and internal plates is very helpful for short-term trading.

Simply put, the difference between internal and external plates is about who is more eager. When someone is willing to sell immediately at the current bid price, that is an internal plate transaction, indicating that sellers are more eager to sell. Conversely, if someone is willing to buy immediately at the current ask price, that is an external plate transaction, indicating that buyers are more eager to enter the market. This reflects the mentality of both buyers and sellers in the market.

My own experience is that when looking at the five-level quotes, pay attention to the green buy orders on the left and the red sell orders on the right. If buy orders at levels one, two, and three keep stacking up, but the stock price does not rise, be cautious as it might be the main force enticing more buying. Conversely, if sell orders keep increasing but the price remains flat, be alert that someone might be trying to lure in short positions.

Regarding the application of the meaning of external and internal plates, I think the most practical approach is to combine it with the stock’s position. When external plates are larger than internal plates, and the stock price continues to rise with increased volume, that is a truly healthy bullish signal. If you only see external > internal but the price doesn’t move, then it’s worth questioning. Conversely, if internal > external and the price is falling, that is a genuine bearish signal.

That said, I must emphasize: the ratio of internal to external plates is just a technical analysis tool and can be easily manipulated by the main players. Sometimes, you see a large internal plate and think the price will fall, but then it suddenly rebounds. This is because the market is still influenced by news and fundamentals. So, the best approach is to combine internal and external plates with volume and support/resistance zones for more accurate judgment.

My own strategy is that when a stock hits a support zone, if at the same time external plates start increasing and volume expands, it might be a good time to consider going long. Conversely, when the price reaches a resistance zone and internal plates suddenly increase, that’s a signal to reduce holdings. If the stock breaks below the support zone or above the resistance zone, that usually indicates the start of a new trend, which may continue until it hits the next support or resistance.

In summary, understanding the core of external and internal plates is about understanding market mentality. Large internal plates indicate sellers are eager, large external plates indicate buyers are eager, but the specific operation still needs to be judged comprehensively with price, volume, and fundamentals. Relying on a single indicator won’t get you far.