I just realized that many people still do not truly understand how supply and demand work in the market, even though it is the main driving force behind the prices of everything—from stocks, gold, to digital assets.

What’s important is that supply is the willingness to sell goods or services at various price levels, not just the quantity available, but how much sellers are willing to offer at each price point. This is opposite to demand, which is the willingness to buy.

Now, let’s look at it from the opposite perspective. When prices go up, sellers are willing to sell more because they make higher profits. But buyers will reduce the amount they want to purchase. This is the key point—supply is a factor that moves in the same direction as the price, unlike demand which moves inversely.

In the real market, prices will stop changing when they reach equilibrium, which is the point where the demand curve intersects with the supply curve. If the price is higher than that, sellers are willing to sell more, but buyers buy less, leading to excess supply, which pushes the price down. Conversely, if the price is below equilibrium, buyers want to buy more, but sellers are willing to sell less, causing shortages, which push the price up.

What I find interesting is that the factors affecting supply are not just price. They include production costs, technology, even natural disasters and tax policies. For example, when the Strait of Hormuz was closed, over 20% of the world’s crude oil passing through that point disappeared in an instant. This is called a supply shock. Oil prices surged immediately because demand remained the same, but the amount offered by sellers dropped sharply.

Speaking of investing, this principle applies to both fundamental and technical analysis. For fundamental analysis, stock prices represent the company’s value. Good news makes buyers more willing to buy and sellers less willing to sell, causing prices to rise. Bad news does the opposite.

For technical analysis, we can interpret green candlesticks (closing price higher than opening) as signals that demand is winning, while red candlesticks (closing price lower than opening) indicate supply has the upper hand. Support levels are points where buyers are waiting to buy, and resistance levels are points where sellers are waiting to sell.

The popular Demand and Supply Zone technique involves looking for moments when prices move strongly and then pause within a range. After that, wait for the price to break out of that range. A break above indicates demand has strengthened; a break below signals supply has regained strength. That’s the entry point for trading.

In summary, understanding that supply is a key factor in determining prices is not difficult if you know what to look for. Observe how prices move in the real market, which news affects demand, and which affects supply. Over time, this will help you see the bigger picture more clearly.