I've just noticed that people are talking more and more about demand and supply in the investment community. Honestly, these principles are simple but deep and more important than you might think.

Actually, demand and supply are just the desire to buy and the desire to sell. That's all. But they determine the prices of all assets, from stocks, energy, gold, to digital coins, making them more significant than you might realize.

Let's break down the understanding. Demand (Demand) is the desire to buy at different price levels. When prices are low, people want to buy more. When prices are high, demand decreases. This is called the law of demand, caused by two factors: income effect (money becomes more valuable as prices fall) and substitution effect (people switch to other products when the current one becomes cheaper).

Supply (Supply) is the opposite. It’s the desire to sell at different price levels. When prices go up, sellers are willing to sell more. When prices go down, they want to sell less. This is called the law of supply.

Once you understand both, the actual market price occurs at the equilibrium point where the demand and supply lines intersect. When prices rise above equilibrium, inventories build up, and prices are pushed back down. When prices fall too low, shortages occur, and prices are driven up. The system balances itself.

What’s interesting is that in financial markets, demand and supply are more complex. They don’t just reflect the price of goods but also mirror investors’ beliefs and expectations. When interest rates are low, investors tend to buy more stocks. Demand increases, and prices go up. When bad news hits, everyone wants to sell. Supply surges, and prices drop without remorse.

A good example is the Strait of Hormuz incident in 2026. During tense situations, about 20% of the world’s oil transportation routes disappeared. Supply sharply decreased, but energy demand remained the same. The result was a rapid spike in oil prices. This is called a supply shock.

For traders, this principle is more useful than you might think. When looking at candlesticks, if they are green (close higher than open), it indicates strong demand, and prices are likely to continue rising. If they are red (close lower than open), it shows strong supply, and prices are likely to fall. If they are doji (open and close are close), it means both sides are in balance, and prices probably won’t move much.

There’s a technique called Demand Supply Zone that traders often use. It involves identifying points where prices move sharply up or down and then pause. When the price breaks out of that pause zone, it signals that demand or supply has regained strength, and prices will likely continue in that direction. This is a good entry point for traders.

In summary, demand and supply are not just economic theories but real mechanisms that drive market prices. Whether it’s stocks, digital coins, or other assets, those who can read changes in demand and supply have an advantage in predicting prices. Studying and practicing this continuously will help you see the bigger picture.