When seeing news of war in the Middle East and various events happening around the world, I notice that asset prices change rapidly, whether it's stocks, energy, gold, or even digital assets. All of these are driven by the same principle—what is supply and demand? which is the fundamental mechanism controlling market movements.

Let's understand what supply and demand are in simple terms. It is the desire to buy and the desire to sell. When more people want to buy while there are few goods, prices rise. Conversely, when there are many goods but no one wants to buy, prices must fall.

Let's look at the details of each side. Demand (Demand) refers to the desire to purchase goods or services at various price levels. If we draw a line showing the relationship between price and the quantity buyers want, we get the demand curve, which follows the basic rule that when prices go up, demand decreases, and when prices go down, demand increases.

Why is this the case? There are two reasons. The first is income effect—when prices fall, our money becomes more valuable, allowing us to buy more. The second is substitution effect—when the price of this good drops, it looks more worthwhile than similar goods, so we choose to buy this instead.

But demand is not only influenced by price. Other factors include consumers' income, the prices of related goods, tastes, the number of buyers, and future price expectations. Additionally, seasons, government policies, technology, and consumer confidence also have impacts. For example, when war occurs in the Middle East and the Strait of Hormuz is closed, oil demand skyrockets because transportation is disrupted.

Next, let's look at supply (Supply), which refers to the desire to sell goods or services at various price levels. The supply curve shows the quantity that sellers are willing to put on the market at a given price. The law of supply states that when prices rise, sellers want to sell more; when prices fall, they want to sell less because it’s not profitable to produce.

Supply is also affected by many factors, such as production costs, prices of alternative goods, the number of competitors, technology, and future price expectations. Weather and natural disasters also play a role. Tax policies, exchange rates, and access to funding influence production capacity as well.

This is the key point—actual market prices are not determined solely by demand or supply but at the equilibrium point where the demand and supply curves intersect. At this point, the quantity buyers want to purchase equals the quantity sellers want to sell.

If the price rises above the equilibrium, sellers want to sell more, but buyers want to buy less, leading to excess inventory, which pushes prices back down to the equilibrium. Conversely, if the price drops below the equilibrium, buyers want to buy more, but sellers want to sell less, causing shortages and prices to rise back to the equilibrium.

This is the importance of understanding what supply and demand are—it's a tool that helps us predict prices and trading volumes. If we understand what drives supply and demand, we can forecast market prices.

In financial markets, stocks and other assets are also commodities. Macroeconomic factors such as economic growth, inflation rates, and interest rates influence demand. When interest rates are low, investors seek higher returns in the stock market. Liquidity in the financial system, investor confidence, and earnings forecasts also impact demand.

On the supply side, policies by listed companies, such as share buybacks or capital increases, affect the number of shares available. New listings (IPOs) increase supply, and stock exchange regulations influence the ability to issue securities.

When the economy grows well, many companies are interested in listing, causing demand and supply factors to work together. Understanding these relationships helps investors analyze the market comprehensively.

Let's look at applying this in fundamental analysis. When stock prices fall, it indicates strong selling pressure or high supply. When prices rise, it indicates strong buying interest or high demand. Changes in profit forecasts or company valuation alter demand and supply. If forecasts improve, buyers are willing to pay higher prices or buy in larger quantities. Sellers may hold back, causing prices to rise. Conversely, if forecasts worsen, buyers delay purchases, and sellers are willing to lower prices, causing prices to fall.

In technical analysis, supply and demand are used in various forms, such as candlestick analysis. If a candlestick is green (closing higher than opening), it shows demand is strong. If red (closing lower than opening), it indicates supply is strong. Doji candles (opening and closing prices close together) suggest a balance of power.

Price trend assessments also help. If prices make new highs, demand remains strong. If they make new lows, supply is dominant. If prices move within a range, it indicates a balance between the two forces.

Support and resistance levels reflect supply and demand. Support is where demand is waiting to buy; resistance is where supply is waiting to sell.

A popular technique is the Demand Supply Zone, which looks for moments when prices lose balance. Prices may surge rapidly upward or plunge sharply downward, then pause within a range before changing direction.

Reversal trading has two types. First is DBR (Drop Base Rally)—prices drop quickly, pause, then reverse upward. Traders can buy at breakout above the resistance. Second is RBD (Rally Base Drop)—prices rally quickly, pause, then reverse downward. Traders can sell at breakdown below support.

Trend continuation trading is more common, with two types: RBR (Rally Base Rally)—prices rally, pause, then rally again; and DBD (Drop Base Drop)—prices drop, pause, then continue downward.

In summary, what is supply and demand? It is the core of price setting in markets. Economists, traders, and investors all use this principle in their analysis. Learning about supply and demand isn't difficult if we experiment and study real asset prices. The more we observe, the clearer the picture becomes.