I want to talk to everyone today about a topic that seems simple but, if understood deeply, can help us read the market more accurately. That is, what exactly is demand and supply, and why are they so important for investing?

Actually, demand and supply are at the heart of price movements in every market, whether it's stocks, energy, gold, or even digital assets. All of these are driven by the same force: the desire to buy versus the desire to sell.

Simply put, demand is when people want to buy goods at different prices. If the price drops, the demand to buy increases because they have more money left and think it's a better deal. Conversely, if the price rises, the demand to buy decreases. This is called the Income Effect and the Substitution Effect, which influence buyers' behavior.

On the other hand, supply is the sellers who want to offer goods at various prices. Opposite to demand, if the price increases, sellers are willing to sell more. If the price drops, sellers will reduce the quantity they offer.

What’s interesting is that when demand and supply meet at the equilibrium point, the price and quantity tend to stay stable. If the price rises above this point, sellers want to sell more but buyers want to buy less, leading to excess inventory and downward pressure on price. Conversely, if the price drops below this point, buyers want to buy more but sellers want to sell less, causing shortages and upward pressure on price.

Many other factors also influence demand and supply, including macroeconomic conditions, investor confidence, company policies, natural disasters, and political situations. A clear example is in March this year, when the Strait of Hormuz was closed, causing about 20% of the world's crude oil to suddenly disappear from the market. While energy demand remained, the result was a rapid spike in oil prices.

Now, demand and supply are tools that investors and traders use to read the market, whether through fundamental analysis or technical analysis. In fundamental analysis, we look at why people want to buy that company or asset. In technical analysis, we use price action and candlestick patterns to observe buying and selling pressures.

Green candlesticks (closing higher than opening) indicate strong demand or buying pressure, while red candlesticks (closing lower than opening) show selling pressure. If a candlestick is a doji (opening and closing prices are close), it indicates that both sides have equal strength, and the price is in a state of indecision.

A popular technique called Demand Supply Zone uses price trend analysis to identify trading opportunities. There are two types: reversal trades, such as DBR (Drop Base Rally), where the price drops, forms a base, then reverses upward; and RBD (Rally Base Drop), where the price rises, forms a base, then reverses downward. The other type is trend continuation, such as RBR (Rally Base Rally), where the price continues upward, or DBD (Drop Base Drop), where the price continues downward.

In summary, demand and supply are the language the market uses to communicate with us. If we understand it well, we can predict price directions more accurately—like reading the market’s mind. Its importance isn’t just theoretical but a practical tool that helps us make smarter investment decisions. For those interested in learning more, try looking at the prices of various assets on Gate. You’ll see firsthand how demand and supply work in real market conditions.