Recently, I noticed that political events and crises around the world affect asset prices in various ways, and this relates to one fundamental principle that I believe everyone who invests should understand: demand and supply, which are the main factors driving the prices of everything from stocks, energy, gold, to digital assets.

Let's look at a real example. In March, the Strait of Hormuz was closed due to the Iran war situation, causing about 20% of the world's crude oil to disappear from the market immediately. This is a situation called a supply shock, where supply decreases sharply. At the same time, energy demand remained the same. As a result, oil prices surged rapidly because of the shortage.

Actually, demand and supply refer to the desire to buy and the desire to sell, which are basic concepts but have deeper implications. When prices rise, sellers want to sell more, but buyers reduce their purchases. Conversely, when prices fall, buyers want to buy more, but sellers reduce their sales. What's interesting is that the actual market price occurs at the point where the demand and supply curves intersect, called equilibrium.

In financial markets, demand and supply still follow the same principles but are influenced by more complex factors, such as interest rates, inflation, economic growth, and investor confidence. All these affect investment demand. When the economy grows well, companies tend to enter the stock market more, increasing supply.

For traders and investors, understanding demand and supply can help analyze stock prices. When stock prices decline, it indicates more selling pressure. Conversely, when prices rise, buying pressure is stronger. Technical analysts use tools like candlestick analysis, trend analysis, support and resistance levels to predict which side will ultimately win.

A popular technique is called the Demand Supply Zone, which looks for moments when the price loses balance. Prices may run up or plunge sharply until a new equilibrium is found. When the price slows down, it begins to oscillate within a range. When new factors come in, the price breaks out of that range and continues in the same direction. Traders can enter trades at breakout points.

The key point I want to emphasize is that demand and supply are crucial for understanding price movements, whether in stocks or other financial assets. If you can predict which factors will change demand or supply, you can forecast prices more accurately.

Learning about this isn't difficult if you study actual market prices. Check out Gate to observe the movements of various stocks or digital assets, and analyze how demand and supply behave during different periods. This is the best way to gain a deep understanding of this concept.