How to read the colors of the internal and external plates? Grasp the buying and selling momentum and understand the secrets of stock order books.

When opening the trading software, the five-level quote screen comes into view—the green buy orders, the red sell orders, with numbers constantly jumping. But do you know what these colors represent? Why do changes in the internal and external order colors sometimes cause significant reactions in the stock price? These seemingly complex data are actually a direct reflection of market sentiment.

Master the Five-Level Quotes, Understand Market Order Logic

Before delving into internal and external orders, you must first understand the structure of the five-level quotes. The five-level quotes display the most competitive ten quotes in the current market—five buy orders and five sell orders.

Buy Five Levels (usually shown in green) represent the people willing to buy in the market, arranged from top to bottom, with the highest bid being Buy One; Sell Five Levels (usually shown in red) represent those willing to sell, arranged from top to bottom, with the lowest ask being Sell One.

For example, if the Buy One price is yuan for 1415 shares, and the Sell One price is @E1@ yuan for 281 shares, it indicates that the highest willing buyer in the market is bidding yuan for 1415 shares, and the lowest willing seller is asking @E1@ yuan for 281 shares. The 5 yuan gap between these prices is the zone where buyers and sellers currently cannot reach an agreement.

Internal and External Orders: Who Is Driving the Trades?

The essence of internal and external orders is to distinguish who is actively driving the trades.

When investors want to sell quickly and choose to place a market order at the Buy One price ( yuan), this is a seller accepting the buyer’s offer, passively taking the bid. This transaction is recorded as an internal order. The more internal order data accumulates, the more it indicates that there are many people eager to sell, showing a sense of urgency to offload.

Conversely, when investors want to buy quickly and place a market order at the Sell One price (@E1@ yuan), this is a buyer accepting the seller’s offer, actively raising the bid to buy. This transaction is recorded as an external order. The more external order data accumulates, the more it indicates that there are many eager buyers, showing a desire to chase the price.

The use of colors for internal and external orders is based on this—trading software typically uses green to represent external order data (buy side) and red for internal order data (sell side), allowing traders to quickly identify who is currently dominating the market.

Internal-External Order Ratio: The Market Psychology Behind the Numbers

Internal-External Order Ratio = Internal Order Volume ÷ External Order Volume

This simple ratio conceals deep market psychology:

• Ratio > 1 (Internal > External): Sellers are more aggressive, actively selling more than buyers are chasing, signaling a bearish market. The probability of a price decline is higher.

• Ratio < 1 (Internal < External): Buyers are more aggressive, actively chasing the price more than sellers are selling, signaling a bullish market. The probability of a price rise is higher.

• Ratio ≈ 1: Buying and selling forces are balanced, and the market is in a state of indecision, with short-term trend unclear.

Support and Resistance Zones: Practical Application of Internal-External Ratios

The internal-external ratio must be combined with price position to be truly effective.

Support zones typically form when internal orders are greater than external orders. When the price keeps falling to a certain level, a large number of buy orders appear at that price, indicating many believe it’s “cheap enough” and are willing to establish long positions. These buy orders form a fortress that can prevent further decline and even trigger a rebound.

Resistance zones occur when external orders are greater than internal orders but the price cannot continue rising. Even if buyers keep chasing the price, it is blocked at a certain level. This often happens because those who bought at higher prices are reluctant to sell at a loss, and when the price approaches their purchase level, they rush to sell to cut losses, creating heavy selling pressure—forming a resistance zone.

Four Typical Market Scenarios in Practice

Scenario 1: External Orders > Internal Orders, Price Rising This is the healthiest bullish signal. Buyers are actively entering, pushing the price higher. If accompanied by increased volume, the upward momentum is stronger. Consider bullish trading.

Scenario 2: Internal Orders > External Orders, Price Falling This is the healthiest bearish signal. Sellers are actively offloading, causing the price to decline. If volume increases, downward pressure intensifies. Avoid bullish positions.

Scenario 3: External Orders > Internal Orders but Price Falls Instead of Rising, Volume Fluctuates Beware of “trap to induce buying.” Major players may deliberately place large sell orders to attract retail buyers (creating external orders), while secretly selling off. When you see bid orders from Sell One to Sell Three repeatedly increasing but the price suddenly drops, it’s a classic “inducing buy” trap.

Scenario 4: Internal Orders > External Orders but Price Rises Instead of Falling, Volume Fluctuates Beware of “trap to induce shorting.” Major players may deliberately place large buy orders to lure retail sellers (creating internal orders), while secretly accumulating chips. When bid orders from Buy One to Buy Three keep piling up but the price continues to rise, it’s a typical “inducing short” trap.

Advantages and Limitations of Internal-External Order Indicators

Advantages:

• Real-time, data and transactions update simultaneously
• Simple concept, easy to understand, no complex calculations
• When combined with bid/ask orders and volume, can quickly judge short-term trends

Limitations:

• Easily manipulated by major players (placing orders → executing → canceling), relying solely on this can be deceiving
• Only reflects current transaction behavior, cannot predict long-term trends
• Must be combined with technical and fundamental analysis; relying on it alone can be misleading

Core Rules for Interpreting Internal-External Order Colors

Market participants should remember a simple logic:

Green (buy side external orders) active → Bullish signal → Price likely to rise

Red (sell side internal orders) active → Bearish signal → Price likely to fall

However, this logic only works when combined with price position, volume changes, and order book structure. Any single indicator can be manipulated by major players; multi-angle observation is necessary to improve success rate.

Summary

Internal and external orders directly reflect market buying and selling sentiment. The color changes of internal and external orders are like an electrocardiogram of stocks—frequently jumping green indicates strong buying momentum, continuously growing red indicates heavy selling pressure. Learning to read this “ECG” helps better grasp short-term opportunities.

But ultimately, financial investment cannot rely solely on a single indicator. Internal-External Order Ratio, support and resistance zones, technical indicators—all are tools. True profit comes from comprehensive judgment—monitoring order book dynamics, paying attention to company fundamentals, and considering the overall economic environment. Only by doing thorough research can you navigate the market steadily.