I've just noticed that many people still do not understand the fundamental mechanism that drives the prices of all the assets we are trading, whether it's stocks, oil, gold, or even digital assets. Amid market changes and political situations, the principles of supply and demand remain key to understanding how prices move.

Let's start with the basics: demand is the desire to buy, while supply is the desire to sell. When you look at a price chart, the point where the demand and supply lines intersect is the equilibrium point where the price should be. At this point, the price tends to stabilize because if the price rises, sellers will want to sell more, but buyers will buy less, leading to excess supply and a downward pressure on price. Conversely, if the price drops, buyers want to buy more, but sellers are reluctant to sell, creating excess demand and pushing the price up.

The law of supply states that the relationship between price and the quantity that sellers are willing to sell is direct. When prices go up, sellers want to sell more; when prices go down, they want to sell less. This is because at higher prices, sellers see profit opportunities, but at lower prices, production costs may exceed selling prices.

What’s important is understanding what factors influence demand, such as interest rates. When rates are low, investors don’t get much return from deposits, so they turn to stocks more, increasing demand and raising stock prices. Investor confidence also plays a big role; if economic prospects look good, everyone wants to buy stocks, causing demand to explode and prices to soar. Conversely, if economic outlook is poor, everyone wants to sell, increasing supply and causing prices to fall.

For supply, factors include production costs, technology, tax policies, and natural disasters. A clear example is the Strait of Hormuz. In 2026, geopolitical tensions led to the closure of one of the world’s five major oil transit routes. As oil supply suddenly disappeared, consumers still needed oil, leading to shortages and rapid price increases. This is a perfect example of a supply shock.

Once you understand this, you can apply it to trading. First, look at candlesticks: if the candlestick is green, it indicates strong demand; the closing price is higher than the opening, meaning buyers won. If it’s red, sellers win; the closing price is lower than the opening. A doji candlestick indicates indecision, where neither side has a clear advantage.

Another method is to observe trends: if prices are making new highs consistently, demand remains strong, and the uptrend is not over. If prices are making new lows, supply is winning, and the downtrend continues. Support and resistance levels are points where demand or supply is waiting to buy or sell.

One popular technique among traders is the Demand and Supply Zone. It may seem complicated, but it’s simply about identifying points where the price loses balance, moves sharply up or down, then pauses to form a base. When good news comes, the price breaks out of that base in the same direction. Sometimes, prices rise significantly and then reverse sharply downward, creating a Drop Base Drop pattern repeatedly.

Remember, the basic rule of supply and demand is a simple relationship: when prices go up, sellers want to sell more; when prices go down, sellers want to sell less. This is the fundamental mechanism. Once you understand this, you’ll see that stocks, bonds, commodities—everything—is driven by the same principle.

Learning this might seem boring, but if you’re serious about investing, try opening a chart of stocks or assets you’re interested in. Observe what happens when good news hits—why do prices go up or down? Often, the answer is that demand or supply has changed. The sooner you understand this, the better you can catch the right moments.