I've just noticed that demand and supply remain fundamental principles for understanding price movements, whether it's stocks, oil, gold, or even digital assets. In this current volatile market, they have become essential tools that traders really need to understand.

Let's start with the basics - demand is the desire to buy from people, while supply is the amount of goods offered by sellers. When we plot these figures on a graph, we get two curves that tell us how much people want to buy and how much sellers want to sell at different prices.

The interesting point is that the law of demand is opposite to price - as prices go up, demand decreases; as prices go down, demand increases. This happens for two reasons: first, when prices fall, our money becomes more valuable (income effect); second, when goods are cheaper, we tend to buy them instead of substitutes (substitution effect).

Supply works in the opposite direction - as prices rise, sellers want to sell more; as prices fall, they want to sell less. The reason is: at higher prices, producers earn more profit, and production costs also influence this.

A perfect example is what happened recently - in March of this year, when the Strait of Hormuz was closed due to geopolitical tensions, about 20% of global crude oil suddenly disappeared from the market. This is a "shock" to supply - a drastic reduction in volume, while demand remained the same. The result? Oil prices surged rapidly because of market shortages.

Now, let's talk about equilibrium - this is the point where demand and supply curves intersect. At this point, price and quantity tend to stabilize. Why? If prices rise above this point, sellers want to sell more but buyers want less, leading to excess supply and downward pressure on prices. Conversely, if prices fall below equilibrium, buyers want more while sellers want less, causing shortages and upward price pressure. The market continuously seeks balance.

When it comes to financial markets, what is the purpose of studying supply? It’s about understanding where the money flows, how investor confidence affects demand, how corporate policies like issuing new shares or buybacks influence supply, and how economic confidence boosts demand.

For fundamental analysis, when stock prices fall, it indicates strong selling pressure (supply). When prices rise, it shows strong buying interest (demand). What drives this is expectations about company profits, economic growth, and other factors affecting intrinsic value.

For technical analysis, we have better tools. Green candlesticks (closing higher than opening) show buying dominance; red candlesticks (closing lower than opening) show selling dominance; doji candles (opening and closing near the same level) indicate a balance between buyers and sellers.

Price trends are another indicator. If prices keep making new highs, buying momentum remains strong. If they keep making new lows, selling pressure is effective. If prices fluctuate within a range, both sides have equal strength.

Support and resistance work because of supply and demand studies - support is where many investors believe the price is a good buy (demand waiting to buy), while resistance is where they think the price is too high and want to sell (supply waiting to sell).

Demand Supply Zone techniques are popular because they capture moments when price loses balance and oscillates to find new equilibrium points. There are two scenarios: reversal (change in trend) and continuation (trend persists).

A bullish reversal (DBR - Demand Zone Drop Base Rally) occurs when excessive selling causes prices to drop, then pause (base), before buying wins and prices rise again.

A bearish reversal (RBD - Supply Zone Rally Base Drop) is the opposite - excessive buying pushes prices up, then pauses, but selling eventually dominates and prices fall.

For trend trading, RBR (Rally Base Rally) in an uptrend means buying strength is returning; DBD (Drop Base Drop) in a downtrend indicates selling pressure remains dominant.

What I find most useful is studying supply and understanding that the goal is to learn how to read what the market is saying, rather than trying to predict it. There’s no magic formula, but principles that work. The key is practicing with real data and observing how these rules perform in the market.

If you're interested in deepening your understanding of price analysis and market movements, try analyzing different assets' trends on Gate, see if you can identify support, resistance, and reversal points. That’s the best way to learn.