Notice that supply and demand are fundamental concepts that are very important for anyone who wants to understand price movements in the market, whether it’s stocks, energy, gold, or even digital assets.

Let’s start with the basics: what is supply? In economics, supply is the willingness to sell goods or services at various price levels. Demand, on the other hand, is the willingness to buy. When prices rise, sellers are more eager to sell, but buyers will buy less. Conversely, if prices fall, consumers are more willing to buy, but sellers are less eager to sell.

What’s interesting is that when a situation like the one seen when the Hormuz Strait was closed in March occurs, over 20% of the world’s crude oil transportation is disrupted. Supply suddenly decreases sharply, while demand remains the same. The result is a rapid increase in prices due to shortages. This is a clear supply shock.

In financial markets, supply and demand work the same way. When good news about a company is announced, investors are willing to buy shares at higher prices, and sellers hold back from selling. Prices then rise. Conversely, if the news is bad, buyers hold back, and sellers rush to sell, causing prices to fall.

Understanding supply and demand helps traders better time their buy and sell decisions. Look at the price action of candlesticks: if a large green candle appears, it indicates strong buying pressure, and prices are likely to continue rising. If a large red candle appears, it indicates strong selling pressure, and prices may continue to decline.

The Demand Supply Zone technique, which is popular, is based on the principle that when prices rally quickly and then pause within a range (Base), if buying pressure returns strongly, prices will break through resistance and rally further (RBR pattern). Conversely, if prices drop rapidly and then pause (Base), but selling pressure returns strongly, prices will break through support and continue downward (DBD pattern).

It’s important to remember that supply and demand do not operate independently. They often work together. When the economy is doing well, new companies are more interested in entering the market, increasing supply. At the same time, demand also rises because investor confidence is high. Both factors influence prices simultaneously.

Learning about this isn’t that difficult. Just keep observing the actual asset prices in the market and try applying these principles. The more you practice, the clearer the picture will become.