I just realized that many people are still confused about the most fundamental concept in the financial markets, which is supply and demand. Actually, it’s not as complicated as you think. Just understanding the relationship between these two sides can help you read the market much better.

Let’s start with the basics: demand is the desire to buy, and supply is the desire to sell. But it’s not just that. When we talk about demand, we’re referring to the relationship between price and the quantity that buyers want. The lower the price, the more people want to buy. Conversely, the higher the price, the fewer people want to buy. This is the basic rule of demand, known as the Law of Demand by economists.

As for supply, it works in the opposite direction. The higher the price, the more sellers want to sell because they make more profit. But if the price drops, sellers will slow down their sales or reduce the offered quantity. This is called the Law of Supply.

This is important — the actual market price doesn’t come from demand or supply alone but from the point where the demand and supply curves intersect. We call this point the Equilibrium or the balance point, where price and quantity tend to stay stable.

Imagine if the price rises above the equilibrium point. Sellers will want to sell more, but buyers will want to buy less, leading to excess supply, which pushes the price down. Conversely, if the price falls below the equilibrium point, buyers want to buy more, but sellers want to sell less, causing shortages and pushing the price up. This system naturally adjusts itself.

Now, look at the real market, such as the event in March 2026 when the Hormuz Strait was closed due to the Middle Eastern war. This caused about 20% of the world’s crude oil to suddenly disappear from the market. This is a Supply Shock — a drastic reduction in supply. Meanwhile, energy demand (demand) remained the same. The result was a rapid spike in oil prices because the market was short of supply.

In financial markets, the same principle applies, but with more complex variables, such as investor confidence, interest rate policies, liquidity in the financial system, and earnings forecasts of companies. All of these affect the demand and supply of stocks.

Studying demand and supply is very useful for analyzing stock prices. If you see stock prices rising, it indicates that demand (buying pressure) is stronger than supply. Conversely, if prices fall, it shows that supply (selling pressure) is winning.

In technical analysis, we use tools like candlesticks to observe the clash between buying and selling forces. Green candlesticks indicate demand wins, red candlesticks show supply wins, and if it’s a doji (open-close the same), it means both sides have equal strength.

Another popular method is identifying support and resistance levels. Support is the price level where buyers are waiting to buy, and resistance is where sellers are waiting to sell. Understanding these points helps you better time your buy and sell decisions.

There’s also a technique called Demand Supply Zone, used in trading, which looks for points where price loses balance and seeks a new equilibrium. For example, DBR (Demand Zone Drop Base Rally) — the price drops due to excess supply, then pauses and rebounds. Or RBD (Supply Zone Rally Base Drop) — the price rises because of excess demand, then pauses and drops again.

What I see is that many people only look at the price but don’t consider what causes the price to change. If you understand demand and supply, you understand market behavior and can more accurately predict price directions.

Most importantly, studying demand and supply isn’t just theory — it’s a practical tool used daily in the market. Try applying it in real trading, observe asset prices, and you’ll see that it really works.