I just noticed that some people are asking what supply actually means. Why do stock prices go up and down like this? In reality, it’s simpler than you think because everything in the market depends on just two things: who wants to buy and who wants to sell. Once you understand this well, predicting the direction of prices won’t be as difficult as you imagine.

Let’s start with the basics. Demand is the desire to buy goods or services at various price levels. Imagine a graph showing the relationship between price and the quantity people want to buy. This is called the demand curve. It basically explains that when prices go up, people buy less; when prices go down, people buy more. This is the fundamental law of demand that keeps the market functioning.

Why is this the case? There are two main reasons. The first is the income effect. When prices decrease, our money in the wallet becomes more valuable—think of it as feeling richer because goods are cheaper—leading us to buy more. The second is the substitution effect. When this good becomes cheaper compared to other goods, we choose to buy this one instead of others. Simply put, lower prices make us more likely to buy.

But demand isn’t only influenced by price. Many other factors affect our buying decisions, such as personal income, the prices of related goods, personal tastes, the number of consumers, and future price expectations. These factors all influence how much people want to buy. Additionally, seasonal changes, government policies, technological developments, and consumer confidence also play roles. All these together determine how much people want to buy.

Now, let’s talk about supply. Supply refers to the desire to sell goods or services at various price levels. From the seller’s perspective, when you plot this, you get the supply curve. Each point on this curve shows the quantity sellers are willing to offer at a certain price, or in other words, the minimum price at which sellers are willing to sell a certain amount.

The law of supply is quite the opposite of demand. When prices rise, sellers want to sell more; when prices fall, they want to sell less. Why? Because higher prices make it more profitable to produce and sell goods, while lower prices make it less worthwhile.

Factors affecting supply are also numerous. They include production costs, the prices of alternative goods that producers might choose to make instead, the number of competitors, technology, and future price expectations. Weather conditions, natural disasters, tax policies, price controls, exchange rates, and access to financing also influence sellers’ decisions.

A good example is what happened in March when the Strait of Hormuz was closed due to the Iran conflict, causing over 20% of the world’s oil to disappear from the market. This was a situation where supply sharply decreased while demand for energy remained because the world still needs oil. The result? Prices surged rapidly. This is a perfect example of an imbalance between demand and supply.

So, what is equilibrium? Knowing just whether people want to buy or sell isn’t enough because the actual market price occurs where the demand and supply curves intersect. This point is called equilibrium. At this point, both price and quantity tend to stay stable.

Why? If the price rises above equilibrium, sellers want to sell more, but buyers want to buy less, creating excess supply that pushes prices back down. Conversely, if the price drops below equilibrium, buyers want to buy more, but sellers want to sell less, creating shortages that push prices back up. The market has an inherent mechanism that pulls prices toward this equilibrium point.

This is why traders and investors need to understand this concept. If you can forecast demand and supply, you can also predict prices. This idea applies to all asset types—from stocks, energy, gold, to digital assets.

In financial markets, price movements are influenced by even more complex factors. Demand factors include economic growth, inflation rates, interest rates, market liquidity, and investor confidence. When interest rates are low, investors tend to seek higher returns in stocks, increasing demand.

Supply factors in financial markets include corporate policies, new listings, and legal regulations. Companies buying back shares reduce supply, while issuing new shares or IPOs increase supply. The overall economic growth and confidence also influence supply and demand dynamics.

These factors work together and influence each other. When the economy is strong, more companies want to go public, increasing supply, but rising confidence also boosts demand. Understanding these relationships helps you analyze the market comprehensively.

When it comes to stock analysis, stocks are commodities, so the laws of demand and supply apply. Rising stock prices indicate strong demand; falling prices suggest strong supply. But in fundamental analysis, we don’t just look at the price. We analyze profit forecasts and the company’s value.

Good news, like better-than-expected earnings or optimistic growth forecasts, encourages buyers to pay higher prices, and sellers hold back, pushing prices up. Conversely, bad news causes buyers to hesitate and sellers to lower prices, leading to declines.

In technical analysis, we use various tools to identify buying and selling pressures. Looking at candlestick charts is one of the simplest methods. Green candles show strong buying, closing higher than opening; red candles show strong selling, closing lower than opening. Doji candles indicate indecision, with no clear direction.

Trend analysis also helps. If prices make new highs consistently, demand is strong. If prices make new lows, supply is dominant. If prices move within a range, it indicates a balance between supply and demand.

Support and resistance levels are related to demand and supply. Support is where buyers are waiting, believing the price is attractive; resistance is where sellers are waiting, thinking the price is too high.

A popular technique is the Demand Supply Zone, which identifies entry points when prices move rapidly up or down—showing excess demand or supply. After such moves, prices often pause within a range to establish a new balance. When the range breaks, prices tend to continue in the same direction.

There are two main trading styles: trading reversals and trend following. Reversal trading involves identifying points where forces clash and change direction. Trend following involves entering after the price pulls back to a support or resistance level and then continues in the same trend.

In summary, supply means the supply side of the market, and demand is the desire to buy. Both are the core of market dynamics. Once you understand how these forces work, you can better forecast prices. Whether trading stocks, gold, energy, or other assets, these principles apply everywhere, all the time—just requires practice and studying real market prices.