I just noticed that there is a quite interesting aspect regarding how the prices of all assets move, from stocks, oil, gold, to digital assets. They are all driven by the same fundamental mechanism: supply and demand.

It's that simple, but the meaning of supply and demand is deeper than you think. When we understand what drives the market, we can see more clearly why prices change.

Starting with demand, it's simply the amount of goods people want to buy at different prices. When prices drop, people want to buy more. Conversely, when prices rise, demand decreases. This is called the law of demand. There are two main factors affecting this: income effects (when prices fall, we have more money left, so we can buy more) and substitution effects (when this item becomes cheaper, we stop buying other things and buy this instead).

Supply is the other side—the willingness of sellers to sell goods at different price levels. The law of supply is opposite to demand. When prices go up, sellers want to sell more because it’s more profitable. Conversely, when prices drop, sellers don’t want to sell as much.

This is interesting. A clear real-world example is the Strait of Hormuz. During tense situations, about 20% of the world's oil supply passing through that point disappears from the market. Suddenly, supply drops significantly while energy demand (demand) remains the same. The result is that oil prices spike almost immediately. This is a real supply shock.

When demand and supply are balanced, the price reaches equilibrium. At that point, prices won’t keep changing. But if the price rises above the equilibrium, sellers want to sell more, while buyers want to buy less. Inventory builds up, so prices must fall back to equilibrium. Conversely, if prices fall, buyers want to buy more, sellers want to sell less, leading to shortages, and prices will rise again.

For stock investors, this principle applies as well. Stock prices rise because of increased buying pressure, and fall due to stronger selling pressure. Fundamental factors like expected earnings or company growth also influence demand. When good news comes out, people want to buy more; when bad news appears, they rush to sell.

In technical analysis, we look at candlesticks. If the candlestick is green (close higher than open), it indicates buying pressure wins. If it’s red (close lower than open), it shows selling pressure wins. If it’s doji, both sides are balanced.

The popular Demand Supply Zone technique involves identifying points where the price loses balance. When the price moves rapidly up or down and then consolidates, that’s an interesting point. If buying pressure dominates, the price will break upward. If selling pressure dominates, the price will plunge.

The DBR (Drop Base Rally) pattern occurs when prices drop, consolidate, then rise again. Conversely, RBD (Rally Base Drop) happens when prices rise, consolidate, then fall. RBR and DBD are continuation patterns: prices rise and consolidate before rising further, or fall and consolidate before falling further.

Most importantly, understanding that the meaning of supply and demand isn’t as complicated as it seems. It’s simply about visualizing the buying and selling forces. Once you see this clearly, you can better predict where prices are headed next—whether in stocks or other assets.