Have you ever wondered why some stock prices sometimes skyrocket like rockets and other times plunge rapidly? Now I’m going to explain that the answer lies in a basic principle called supply and demand, which is a key concept that investors must understand.

In fact, studying supply and demand isn’t as complicated as you might think. It’s about the desire to buy and the desire to sell, and how those forces affect prices every second—whether it’s stocks, energy, gold, or even digital assets.

Let’s start with the basics. Demand is the desire to buy at different price levels. When you plot it on a graph, you get the demand curve, which tells us how much of a product buyers will want at each price—and most importantly, when prices fall, the desire to buy increases. This is the main rule of demand, driven by two reasons: buyers have more money left over (Income Effect), and this product looks cheaper than other goods (Substitution Effect).

Supply, on the other hand, is the opposite of demand. When prices rise, sellers are more willing to sell more because profits are higher. There are many factors that affect supply, such as production costs, technology, expectations for future prices, and even weather conditions.

A clear example is in March 2026, when the Strait of Hormuz was closed due to the Iran war situation, causing about 20% of the world’s crude oil that passes through this point to suddenly disappear from the market. Meanwhile, the demand for energy remained in place. The result was a rapid surge in oil prices. This is a perfect Supply Shock.

Studying supply and demand is therefore important because it helps you understand the equilibrium point (Equilibrium)—the point where the demand curve and the supply curve intersect. At this point, price and quantity tend to remain stable, because if prices rise, sellers will sell more but buyers will buy less, which leads to excess supply and pushes prices down. Conversely, if prices fall, the opposite happens.

In financial markets, factors that affect demand include interest rates, investor confidence, economic growth, and system liquidity. When interest rates are low, investors chase higher returns in the stock market, which increases stock demand.

As for supply in the stock market, it depends on company policies, such as share buybacks (reducing supply) or issuing new shares (increasing supply), the IPO of new companies, and requirements set by the stock exchange.

For stock analysis, investors can use two approaches to supply and demand: Fundamental Analysis and Technical Analysis.

In Fundamental Analysis, rising stock prices indicate strong demand because investors believe the company will grow. In contrast, falling prices indicate strong supply because negative news has come in.

In Technical Analysis, traders use various tools, such as candlestick charts. If the candlestick is green (the closing price is higher than the opening price), it indicates strong demand. If it’s red, it indicates strong supply. If it’s a doji (opening and closing at the same level), it shows that both sides are battling evenly.

Studying demand also includes analyzing market trends (Market Trend). If prices keep making new highs, demand is winning. If prices keep making new lows, supply is winning. If prices move within a range, it means both sides are on equal footing.

Traders these days often use the Demand Supply Zone, looking for moments when price loses balance and is moving toward a new equilibrium. There are two types. One is reversal trades (Reversal), such as Demand Zone Drop Base Rally (DBR), where the price drops sharply, forms a base, and is ready to reverse upward; or Supply Zone Rally Base Drop (RBD), where the price rallies, forms a base, and is ready to reverse downward.

The other is trend continuation (Continuation), such as Demand Zone Rally Base Rally (RBR), where the price rallies, pauses to form a base, and then continues higher; or Supply Zone Drop Base Drop (DBD), where the price drops sharply, pauses, and then continues dropping.

The truth is that studying supply and demand doesn’t have to be overly difficult. You just need to understand when people want to buy (Demand) and when they want to sell (Supply), and prices will change accordingly. Applying these principles to analyzing stocks and other assets can help you make better investment decisions. But remember that theory and reality in the market aren’t always the same. Practice and learn from real-world execution so you can see the bigger picture more clearly.