I just noticed that many people are still confused about the concepts of demand and supply, which are actually fundamental to understanding the movements of stock prices and assets in general.

Let's start by asking ourselves: what is the law of supply, and why is it important for investors? The demand to buy versus the demand to sell—these simple numbers drive the prices, whether it's stocks, energy, gold, or even digital assets.

Starting with the buying side, demand (Demand) is the desire to purchase goods at various prices. When prices drop, people usually want to buy more because of two reasons: first, the income effect—lower prices mean more purchasing power; second, the substitution effect—if this good is cheaper than others, people will choose to buy this one instead. Conversely, when prices rise, demand typically decreases.

Factors affecting demand besides price include the buyer's income, the prices of related goods, preferences, the number of consumers, and expectations about future prices. Seasons also play a role. Government policies, technology, and even consumer confidence can influence demand. Unexpected events like wars or crises can drastically change demand as well.

On the supply side, supply (Supply) is the desire to sell goods at various prices. What is the law of supply? Simply put, it’s the opposite relationship to demand: as prices increase, sellers want to sell more; as prices decrease, they want to sell less. Factors influencing supply include production costs, prices of substitute goods, the number of competitors, technology, price expectations, weather conditions, tax policies, exchange rates, and access to capital.

A clear example is the Strait of Hormuz situation: when oil shipping routes are blocked, oil supply drops suddenly by about 20% globally. Meanwhile, energy demand remains unchanged. The result is a rapid price spike—this is a shortage caused by a supply reduction.

But where do prices actually form? At the equilibrium point—that’s where the demand and supply curves intersect. At this point, prices and quantities tend to stabilize because if prices go up, sellers want to sell more but buyers buy less, leading to excess supply and a price decrease. Conversely, if prices fall, buyers want to buy more but sellers sell less, leading to shortages and a price increase.

In financial markets, factors influencing demand include economic growth, inflation rates, interest rates, liquidity in the system, and investor confidence. For example, when interest rates are low, investors tend to seek higher returns in the stock market. Supply is affected by corporate policies like capital increases or share buybacks, new listings, and stock exchange regulations.

Now, how does this relate to trading and investing in stocks? When stock prices go up, it indicates strong demand; when prices go down, it indicates strong supply. In fundamental analysis, demand is driven by earnings forecasts, growth expectations, and structural changes affecting profitability.

In technical analysis, various tools are used. Green candlesticks (closing higher than opening) show strong demand; red candlesticks (closing lower than opening) indicate strong supply. Doji candles (opening and closing prices close) suggest a balance of power. Trends are also analyzed: if prices keep making new highs, demand remains strong; if they keep making new lows, supply is dominant. Support and resistance levels also reflect demand and supply zones.

A popular technique is the Demand Supply Zone, which looks for points where the price loses balance. There are two main patterns: reversal and continuation. Reversal patterns include Drop Base Rally (DBR)—after a sharp decline, the price consolidates and then rises again when demand returns; and Rally Base Drop (RBD)—after a rally, the price consolidates and then drops when supply takes over.

Continuation patterns include Rally Base Rally (RBR)—demand remains strong and the trend continues; and Drop Base Drop (DBD)—supply remains dominant, and the downtrend continues.

In summary, demand and supply are not just economic theories—they are daily tools used by traders and investors. Understanding what the law of supply is and how it works will help you see price movements more clearly. But it also requires practice and studying real price action to develop expertise.