Just happened to organize some insights about the domestic and external order flow in the stock market, sharing with friends who are still exploring charting software.

Many people open their brokerage app to look at the market, and besides the opening price, highest, and lowest, they see these two numbers: domestic (internal) and external (external) order flow, but they have no idea what they are looking at. Actually, these two indicators can help you quickly judge which side—buyers or sellers—is more eager in the market, and even observe short-term capital movements, which is quite practical.

Simply put, the difference between domestic and external order flow lies in who actively pushes the transaction. When the stock price is traded at the bid price, those shares count as domestic order flow, indicating sellers are more eager to unload. Conversely, when the stock price is traded at the ask price, that’s external order flow, meaning buyers are willing to chase the price. For example, if you want to sell immediately and just hit the bid price to sell, that’s domestic; if you want to buy immediately and hit the ask price, that’s external.

The five-level quotes combine domestic and external order flow, showing the top five bid prices and the bottom five ask prices. The green on the left is the bid side, and the red on the right is the ask side. But note, five-level quotes are just order placements, not guaranteed to be executed, as some orders may be canceled at any time.

Now, talking about the ratio of domestic to external order flow, this is the key focus for short-term trading. The domestic-to-external ratio is calculated by dividing domestic order volume by external order volume. A ratio greater than 1 indicates more domestic order flow, high bearish sentiment, and is a bearish signal; less than 1 indicates more external order flow, strong buying interest, usually bullish; equal to 1 means a stalemate between bulls and bears, a consolidation phase.

But here’s a critical point: the domestic-to-external ratio cannot be viewed in isolation. When external order flow exceeds domestic and the price rises, that’s a healthy bullish signal. Conversely, if domestic order flow exceeds external and the price drops, that’s a true bearish signal. If external order flow exceeds domestic but the price instead falls or moves sideways, be cautious—main players might be placing sell orders to lure in buyers, secretly distributing shares. Similarly, if domestic order flow exceeds external but the price is still rising, it could be that big players are intentionally placing buy orders to lure in short-sellers, actively accumulating shares.

The essence of technical analysis is to predict future trends based on changes in price and volume. Besides observing the strength of domestic and external order flow, it’s more important to combine this with support and resistance zones. When the price hits a support zone, there are buyers stepping in, so you might consider going long; when it reaches a resistance zone, there are sellers waiting to take profits, so it’s time to reduce positions or short. Within support and resistance zones, it’s a good opportunity for range trading.

The advantage of domestic and external order flow is its immediacy and simplicity, allowing quick reflection of active market participation. The downside is that it can be manipulated by big players, and looking at it alone can be misleading. It must be combined with volume, technical indicators, and fundamental analysis. No single indicator can dominate all; the domestic-external ratio is just part of technical analysis, and you still need to consider company fundamentals and overall economic conditions.

In short, understanding the logic behind domestic and external order flow can help you judge the market sentiment of buyers and sellers more quickly, but true success still depends on comprehensive preparation and practical experience.