I just realized that many people still don’t really understand what supply and demand are, but they are the key that drives the prices of everything in the market—whether it’s stocks, oil, gold, or even digital assets.

Let’s make it clear: demand is the desire to buy, and supply is the desire to sell. When I put it this way, it sounds simple, but the relationship between the two is much more complex than you might think.

The law of demand tells us that when prices rise, people want to buy less. On the contrary, when prices fall, the desire to buy increases. This involves two things: when prices change, the value of our money changes as well, and we start comparing it with other similar goods.

As for supply, it’s the opposite. When prices are high, sellers want to sell more. When prices are low, they want to sell less. This depends on production costs, the number of competitors, technology, and expectations about future prices.

This is the interesting part: the actual prices in the market are not determined by supply or demand alone, but by the equilibrium point where the demand and supply curves intersect. At that point, price and quantity tend not to change, because if the price rises too much, sellers will sell more and buyers will buy less, leading to excess supply and causing prices to fall back. If the price drops too low, buyers will buy more and sellers will sell less, leading to a shortage and causing prices to rise again.

Now something interesting happens in the financial market. What is supply and demand in the context of investing? It’s not just trading goods—it’s trading beliefs, expectations, and forecasts of a company’s profits.

When the economy is growing well, interest rates are low, or there is good news, investors want to buy more stocks. Demand rises, and prices adjust upward. Conversely, when bad news hits, investors move away from the market—supply increases, and prices adjust downward.

In technical analysis, we use various tools to better assess buying pressure and selling pressure, such as candlesticks: green candles indicate that buyers are strong, red candles indicate that sellers have momentum. You can also look at support and resistance—levels where there is buying or selling pressure waiting to take place.

A popular technique is the Demand Supply Zone, which looks for moments when price loses balance and is likely to find a new equilibrium. When the price drops sharply and then consolidates within a range, it may reverse upward. Conversely, when the price rises sharply and then consolidates, it may reverse downward.

A real-world example is last March: the Strait of Hormuz channel was closed due to political developments. Crude oil supply fell by more than 20%, while demand remained the same. The result was a rapid surge in oil prices. This is a loss of balance between supply and demand.

For investors, if we understand what supply and demand are, we can predict prices more accurately—whether we use fundamental analysis (looking at economic factors and earnings) or technical analysis (looking at price, volume, support, and resistance).

The key is to practice looking and analyzing real market prices, because this concept isn’t as difficult as it sounds. It just takes time to study and test in practice. If you understand it well, your trading or investing foundation will become much more solid.