Just realized why asset prices move the way they do. Supply and demand are simpler than I thought. It’s not as complicated as it seems in economics textbooks.

I happened to notice the oil price movement during the Hormuz Strait issue. Prices surged rapidly because 20% of the globe’s supply disappeared instantly, while demand remained the same. This is a perfect example of a supply shock that made prices flip.

Let’s understand the basics first. Demand is the desire to buy. Supply is the desire to sell. Both are like two opposing forces colliding. When one side’s force is stronger, the price moves in that direction. It’s not complicated at all.

The law of supply says that when prices rise, sellers are more willing to sell more. When prices fall, sellers sell less. That’s the opposite of demand—when prices are high, people buy less; when prices are low, people buy more.

In financial markets, it’s not just the price that changes. Many factors affect demand and supply, such as investor sentiment, company policy, market liquidity, or even the news and information that comes out.

I noticed that when a company releases good news, buyers increase. Buying pressure beats selling pressure, and prices go up. Conversely, bad news makes sellers increase, and prices fall. It’s that simple.

For trading, the Demand Supply Zone technique works well. It looks for points where price starts to lose balance before finding a new equilibrium. When prices drop very quickly and then begin to stabilize, it shows that selling pressure is starting to fade and buying pressure is returning. This is where a reversal may occur. Similarly, when prices run up and then start to slow down, it indicates that buying pressure is running out—get ready for a possible drop.

The law of supply is a signal that helps us understand when prices might change direction. It’s not hard at all—just observe which force is winning, and the price will move that way.

Support and resistance analysis is related to this too. Support is where buyers are waiting. Resistance is where sellers are waiting. When the price breaks through, it shows that the force on that side is stronger.

Take Demand Supply Zone trading as an example. There are two main types: trading when the price reverses, and trading along the trend’s continuation. When prices drop and form a base, then bounce back—that’s a reversal. When prices rise and keep increasing—that’s trend continuation.

In fact, macro factors such as interest rates, economic growth, and market liquidity all affect demand. Company policies, new listings, and regulations all affect supply.

Once you understand this concept, stock valuation becomes easier. Stock prices move up and down based on expectations for earnings, the company’s growth, or the overall market situation. All of these affect demand and supply.

The law of supply is basic knowledge that helps traders and investors read the market better. It doesn’t have to be complicated. Just observe buying and selling forces—once you see which one wins, the price will tell you.

For anyone who’s just getting started, try observing candlesticks. If the candlestick is green, it shows buying pressure wins. If it’s red, it shows selling pressure wins. Do this continuously, and you’ll get a clearer picture and understand how the market works even better.