I just noticed something interesting. Why did oil prices surge so rapidly last March? The answer lies in demand and supply, which many people might think is just an economic theory, but in reality, it is the driving force behind the prices of all assets—whether stocks, energy, gold, or even digital assets.

When the Strait of Hormuz was closed due to tensions in the Middle East, over 20% of the world's crude oil disappeared from the market in an instant. This is what is called a "Supply Shock." While the demand for energy remained the same, the result was a rapid increase in prices, leading those who don’t understand demand and supply to think it was a random event. But in fact, it is a fundamental market law that operates systematically.

So, what exactly is demand and supply? It’s simple—Demand is the desire to buy, Supply is the desire to sell. When these two meet at an equilibrium point, prices are formed.

Let’s go a bit deeper. Demand, or the desire to buy, has an inverse relationship with price. When prices go up → people want to buy less. When prices go down → people want to buy more. This happens due to two reasons: when prices fall, your money’s value increases (Income Effect), and the product becomes cheaper relative to substitutes (Substitution Effect). As for supply, or the desire to sell, it correlates directly with price. When prices go up → sellers want to sell more. When prices go down → sellers reduce their quantity.

What you should know is that demand is influenced by many factors, such as macroeconomic conditions, interest rates, investor confidence, preferences, and even unexpected news. Meanwhile, supply depends on costs, technology, tax policies, and production capacity.

In financial markets, demand and supply work a little differently. Buying demand for stocks depends on earnings forecasts, economic growth, and market liquidity. Selling demand depends on corporate decisions like issuing new shares, buybacks, and new listings.

Now, for the part traders are interested in—using demand and supply to time buy and sell decisions. The popular technique is the Demand Supply Zone, which looks for points where prices lose equilibrium and seek a new balance.

There are two main trading styles. The first is trading at reversal points—such as when prices drop sharply (Drop), then form a base (Base), and subsequently rally (Rally). This signals strong buying interest, and traders can enter on a breakout. The second is trend-following—when prices rise, form a base, and then rise again—indicating sustained buying strength.

Candlestick analysis is also important. Green candles (closing higher than opening) show buying dominance. Red candles (closing lower than opening) indicate selling dominance. Doji candles (opening and closing prices are nearly the same) suggest indecision between buyers and sellers.

An interesting aspect is identifying support and resistance levels, which are often points of concentrated demand or supply. When prices hit support, they tend to reverse upward because buyers are waiting to purchase. Conversely, when prices reach resistance, sellers tend to block further upward movement.

In summary, demand and supply are not just economic theories—they are powerful tools for investors and traders. Understanding how buying and selling forces work helps you predict prices more accurately. Remember, learning this requires experimenting with real market data. Check out the price data on Gate to see how demand and supply operate in action.