Recently, a friend asked me what inside and outside volume in stocks means, and I realized that many beginners are completely confused when looking at trading software for these data. Actually, understanding the meaning of inside and outside volume in stocks can be very helpful for short-term trading. Today, I want to talk about it.

Simply put, inside and outside volume are used to distinguish who is actively driving the trades. When you look at the market, you'll see bid and ask prices; if a trade occurs at the bid price, it is considered inside volume (sellers actively matching), indicating sellers are more eager; if a trade occurs at the ask price, it is outside volume (buyers actively matching), indicating buyers are more eager.

For example, suppose the bid is 1160 yuan / 1,415 lots, and the ask is 1165 yuan / 281 lots. If you sell 50 lots directly at 1160, those 50 lots are counted as inside volume; conversely, if you buy 30 lots directly at 1165, those 30 lots are counted as outside volume. It sounds simple, but in practice, interpreting the meaning of inside and outside volume requires matching it with price movements.

The five-level quotes list the top five bid and ask prices, with the left side showing the five bids (green) and the right side showing the five asks (red). The first bid is the highest current bid, and the first ask is the lowest current ask. However, note that these are just order placements and may not necessarily be executed.

What is truly useful is the inside-outside volume ratio, which is the inside volume divided by the outside volume. A ratio greater than 1 indicates more inside volume, suggesting market bearishness and a signal of selling pressure; a ratio less than 1 indicates more outside volume, showing strong buying interest and usually a bullish signal.

But be careful—I've seen many instances where big players use order placements to lure retail traders. For example, when the stock price is sideways but outside volume is significantly higher than inside volume, it looks like strong buying, but in reality, the ask orders from 1 to 3 are continuously increasing, and suddenly the stock price drops—this is a false bullish signal. Conversely, if inside volume is higher than outside volume but the price rises instead of falling, it could be that the main players are deliberately placing buy orders to attract retail selling, secretly accumulating shares.

Therefore, when using inside and outside volume to judge the market, it's best to combine it with support and resistance zones. When the price drops to a support zone, a high inside volume isn't alarming because there are buyers willing to buy at that level, often leading to a rebound; when the price reaches a resistance zone, a high outside volume doesn't mean you should rush to buy, as there may be selling pressure.

The advantage of inside and outside volume is its real-time nature, allowing quick insight into the urgency of buyers and sellers during trading, which is easy for beginners to understand. The downside is that it can be manipulated and only reflects short-term trading behavior, making it impossible to determine long-term trends. Many people lose money relying solely on inside and outside volume for this reason.

My advice is that inside and outside volume are just part of technical analysis; it’s best to combine it with volume, fundamentals, and overall market sentiment. Never think that understanding inside and outside volume alone guarantees consistent profits. Practice more and understand market psychology—this is the key. You can also use demo accounts to practice more, so you can make better judgments in real markets.