I just realized that supply and demand are really important for investing, but most people tend to overlook this. Whether it's the stock market, oil, gold, or even digital assets, all prices depend on this fundamental concept.

Simply put, demand is the desire to buy, while supply is the desire to sell. When prices drop, people want to buy more, but sellers will reduce the amount they sell because as prices fall, the real value in our wallets increases, allowing us to buy more. This is called the income effect. There’s also the substitution effect, where when prices decrease, we compare with other goods and choose to buy this instead.

Conversely, when prices rise, sellers want to sell more, but buyers will reduce their purchase volume. Both sides have conflicting desires, and importantly, prices are not set by demand or supply alone but at the equilibrium point, where the demand and supply curves intersect.

If prices move up from the equilibrium point, sellers will produce and sell more, but buyers will buy less, leading to excess supply, which pressures prices to fall back down. Conversely, if prices fall below the equilibrium, buyers want to buy more, but sellers reduce their supply, causing shortages and pushing prices back up to the equilibrium point. This is how markets operate, indicating a fair price.

Talking about actual investing, factors affecting demand in financial markets include economic growth, interest rates, and liquidity in the system. When interest rates are low, investors seek higher returns in the stock market. Investor confidence also plays a major role because when people have a positive outlook, they are willing to buy more.

As for supply, it depends on company policies such as share buybacks or capital increases, new listings, and legal regulations. Sometimes climate or natural disasters also impact supply, as do tax policies and access to funding.

A clear example is when the Strait of Hormuz is closed, about 20% of the world’s crude oil disappears from the market. This is a true supply shock—supply drops sharply, but energy demand remains. The result is a rapid increase in oil prices due to shortages.

For fundamental analysis, stock prices move according to supply and demand forces. When stock prices fall, it indicates strong selling or supply. Conversely, when prices rise, it shows strong buying or demand. But importantly, genuine demand comes from expectations of company performance and growth, not just the stock price itself.

If forecasts are positive, buyers are willing to pay higher prices, while sellers hold back, causing prices to rise. If negative news emerges, buyers delay purchases, and sellers are happy to lower prices, causing prices to fall.

In technical analysis, a green candlestick indicates buying pressure wins, with the closing price higher than the opening. A red candlestick indicates selling pressure wins, with the closing price lower than the opening. If it’s a doji, where opening and closing prices are the same, it shows equal strength from both sides.

Trend analysis is also a way to observe supply and demand. If prices keep making new highs, demand remains strong. Conversely, if prices keep making new lows, supply is dominant. If prices move within a range, it indicates both sides have similar strength.

Support and resistance levels also reflect supply and demand. The support level is where buying interest is strong enough that prices are unlikely to fall further and may reverse upward. Resistance is where selling interest is strong enough that prices are unlikely to rise further and may reverse downward.

The Demand Supply Zone technique looks for moments when the market loses balance and tends to oscillate toward a new equilibrium. When large green or red candles appear, prices tend to move rapidly up or down until they find a new balance point where the price slows down.

Demand Zone Drop Base Rally (DBR) occurs from excess supply: prices drop sharply, then consolidate in a range. When buying pressure wins, prices break above the range and turn bullish. Conversely, Supply Zone Rally Base Drop (RBD) results from excess demand: prices rise quickly, then consolidate. When selling pressure wins, prices break below the range and fall sharply.

Trend trading is more common than reversal trading. Demand Zone Rally Base Rally (RBR) occurs from excess demand: prices rise, pause in a range, then continue upward. Supply Zone Drop Base Drop (DBD) results from excess supply: prices fall, pause, then continue downward.

Overall, supply and demand are crucial tools for both economists and investors. They help us understand how prices move. Learning about this isn’t difficult if we study diligently and practice applying it to real market prices. The more we observe how supply and demand work, the better we can understand market movements in depth.