I just saw someone talking about oil prices soaring because the Strait of Hormuz is closed, and I think this is interesting because it’s a perfect example of what the law of demand is and how it works in real markets.

Actually, the prices we see in the stock market, commodities, or even digital assets don’t increase or decrease randomly. They are driven solely by fundamental forces—that is, the demand to buy versus the demand to sell.

Let’s think simply: suppose many people want to buy shares of a new startup, but only a few are willing to sell. The price will keep going up. Conversely, if many want to sell but no one wants to buy, the price must go down. That’s the law of supply and demand in action.

What’s interesting is that it’s not just about price changes. There are many other factors affecting demand, such as lower interest rates, which make people more eager to invest in stocks, or a healthy economy, which leads companies to increase profits, thereby boosting demand. On the supply side, it depends on these factors too, like companies deciding to raise capital, buy back shares, or new companies entering the market through IPOs.

The most important thing is that the actual market price will settle at the equilibrium point—where the demand and supply curves intersect. At this point, price and volume tend to stabilize because if the price rises above this point, sellers want to sell more, while buyers are unhappy with the high price, causing the product to become scarce and the price to fall back. Conversely, if the price drops below equilibrium, buyers want to buy more, but sellers are reluctant to sell, leading to a shortage and the price rising again.

In real stock trading, traders use this principle to forecast prices by observing candlesticks. If a candlestick is green (closing higher than opening), it indicates strong demand and a potential upward move. If it’s red (closing lower than opening), it shows supply dominance and a possible downward trend. Sometimes, traders look at support and resistance levels to identify points where demand or supply is waiting to buy or sell.

A practical example is the Demand Supply Zone technique, which tracks price movements. When prices rally quickly and then pause (base), and a new factor causes prices to rally again, this is called RBR (Rally Base Rally), a positive signal. Conversely, if prices drop sharply, pause, and then drop again (Drop Base Drop), it’s called DBD (Drop Base Drop), a negative signal.

For new investors, understanding what the law of demand is not difficult, but it requires observation and real testing with market prices. By looking at candlesticks, support and resistance levels, and trend movements, once you understand these, predicting prices becomes easier than you think. Try checking the prices of various assets on Gate to see how demand and supply are moving. The more you observe, the clearer the picture becomes.