I’ve noticed for a while that, amid the volatility of global markets and various unexpected events, the only fundamental principle that continues to drive the prices of all assets is supply and demand. Whether it’s stocks, energy, gold, or even digital assets.

Supply is the willingness to sell goods or services at different price levels, while demand is the willingness to buy. These two aren’t as difficult as many people think—what matters is understanding how each one works.

Start with demand. When prices fall, people want to buy more because the money they have can buy more, and lower prices attract those who used to buy other products instead. Conversely, when prices rise, buying demand decreases. This is a basic rule that has never changed.

But supply is a variable that works in the opposite direction. When prices are high, sellers are more willing to sell. When prices are low, they slow down their selling—or sometimes don’t sell at all. This relationship is why sellers want better profit.

The prices you see in the real market aren’t determined by supply or demand alone, but by the point where the two meet—called equilibrium. At this point, the quantity buyers want to purchase equals the quantity sellers want to sell. Prices tend to remain stable because if the price rises above this point, excess supply occurs and forces prices to adjust downward. On the other hand, if the price falls below this point, shortages occur and push prices upward.

When you look at financial markets, demand is influenced by many factors, such as economic growth, interest rates, and liquidity in the system. When interest rates are low, investors often shift toward seeking higher returns in the stock market. Supply, meanwhile, relates to corporate decision-making—for example, share buybacks or capital increases, as well as companies newly getting listed.

Understanding the relationship among these factors is key, because when the economy is doing well, many companies have incentives to enter the stock market, which increases supply alongside rising demand.

To apply this idea in practice, many traders use candlestick analysis. If a candlestick is green, it indicates strong demand—meaning the closing price is higher than the opening price. If it’s red, it indicates strong supply—meaning the closing price is lower than the opening price. In addition, support and resistance are also used: support is where demand is strong, while resistance is where supply is strong.

A popular technique is the Demand Supply Zone. It looks for moments when price moves rapidly up or down, then pauses within a range. When new factors come in, price often breaks through that range and continues in the same direction. Traders can enter positions at the moment of the breakout from the range.

What’s worth noting is that continuation trends happen more often than reversals. When demand or supply is strong enough, it will keep pushing until it encounters an obstacle. For example, in March this year, when the Strait of Hormuz was closed due to the Iran war, oil supply fell by more than 20% globally, while the demand for energy remained the same. As a result, oil prices surged rapidly. This is a classic example of a supply shock caused by an imbalance in supply.

Most importantly, learning this isn’t difficult if we’re willing to actually observe real price movements in the market. Try applying the concepts and see how supply acts as a variable that affects price. The more real examples you see, the deeper your understanding will become.