Recently, I encountered some misunderstandings about demand and supply from many people who asked whether this is important for actual trading. The answer is a big yes, because from stocks, oil, gold to cryptocurrencies, all of these are driven by demand and supply forces.

Let me explain simply first: demand is the desire to buy, while supply is the desire to sell. When more people want to buy, the price goes up. When more people want to sell, the price goes down. That’s how it works. But this topic is deeper than you might think.

Let’s start with demand. The desire to buy isn’t only dependent on price. It also depends on the buyer’s income, their confidence, future expectations, seasons, and even unexpected events like wars or global crises. For example, when the Strait of Hormuz was closed since March, causing a 20% shortage of global oil, the demand for oil surged because people feared shortages.

Supply is similar. The desire to sell isn’t only about price. It depends on production costs, technology, tax policies, weather, and even access to capital. When supply or selling pressure is excessive, prices fall. When there’s a shortage, prices rise.

What’s important I want you to understand is equilibrium. When the demand line and supply line intersect, that’s where the price should be. If the price is above this point, sellers increase, buyers decrease, and the price is pushed down. If the price is below this point, buyers increase, sellers decrease, and the price is pushed up. It’s the natural balance of the market.

In financial markets, demand and supply are even more complex because it’s not just about the product. It involves confidence, earnings expectations, interest rates, and market liquidity. When interest rates are low, people seek returns in the stock market, increasing demand. When the economy grows well, new companies want to go public, increasing supply.

When it comes to real trading, demand and supply are fundamental. If you look at candlesticks, green means strong demand, red means strong supply. If prices keep making new highs, they tend to go higher. If prices keep making new lows, they tend to go lower.

My favorite technique is the Demand Supply Zone, which looks for moments when the price moves strongly (Drop or Rally), then pauses in a range (Base), and then breaks out again. For example, if the price drops sharply and then consolidates, when it breaks out upward, it could signal strong demand. Conversely, if the price rises sharply and then consolidates, a downward breakout might indicate strong supply.

What I’ve learned is that understanding demand and supply isn’t difficult, but it requires practice. You need to observe real prices, see actual buying and selling forces in action, and then you’ll understand how it works. Most importantly, you’ll know where the market is heading next.