Since the situation in the Middle East arose, oil prices have risen rapidly, and this is the reason I started to seriously study the principles of supply and demand because it is the mechanism that drives the prices of all assets, whether stocks, energy, gold, or even digital assets.

What is demand, and why is it important for trading? Simply put, it is the desire to buy and the desire to sell. But when you look deeper, you'll see that it’s more complex than it seems.

Let's start with the buyers' side. Demand or "demand" is the desire to purchase goods at various price levels. If the price is low, people want to buy more. If the price is high, they buy less. This is the simple yet powerful law of demand because when prices change, it affects two things: income effects (when prices fall, our wallets get thicker) and substitution effects (when prices drop, we switch to buying this instead of the old one).

On the other hand, supply or "supply" is the opposite. When prices are high, sellers are willing to sell more. When prices are low, they slow down sales. This is why oil prices surged when the Hormuz Strait was closed because supply suddenly decreased, while energy demand remained the same. The market wanted more but had less, so prices soared.

The equilibrium point is where the demand and supply lines intersect. That’s where prices tend to stabilize because if prices are too high, sellers will sell more, and buyers will buy less, leading to inventory buildup and a price drop. Conversely, if prices are too low, the opposite happens.

In financial markets, this gets more complicated because the factors influencing demand are not only related to stock prices but also to earnings forecasts, company growth, interest rate policies, and investor confidence. If investors believe a company will grow, they are willing to buy at higher prices, pushing the price up. Conversely, if negative news comes out, buyers hold back, and sellers rush to sell, causing prices to fall.

From a technical perspective, I use various tools to observe buying and selling pressure. Green candlesticks (closing higher than opening) indicate strong demand. Red candlesticks (closing lower than opening) indicate strong supply. If prices keep making new highs, demand is still strong. If prices keep making new lows, supply is winning.

The Demand Supply Zone technique I focus on involves looking for moments when the price loses balance. If the price drops and then consolidates within a range (Demand Zone Drop Base Rally), it could signal that buying pressure is returning. If the price rises and then consolidates (Supply Zone Rally Base Drop), it might indicate selling pressure is coming back.

Sometimes, the trend continues without a reversal—prices keep moving in the same direction. This happens when new factors come into play, and demand or supply in the same direction reasserts itself strongly.

Actually, understanding this isn’t difficult, but you need to apply it practically to the prices in the market to see a clear picture. Studying what demand is and how it moves in real markets will help you better predict prices and make more effective investment decisions.