Right now, I’m seeing something very interesting about how the market actually works in the current global tense situation. What drives the prices of all assets—whether stocks, energy, gold, or even digital assets—boils down to a single fundamental principle.

It’s about the desire to buy and the desire to sell. It seems simple, but in reality, it’s much more complicated. I need to break it down and think through it piece by piece.

And why is it important for investing? Because if we understand where buying and selling pressure comes from, we can predict where prices might go.

Let’s start with demand. This is the desire to buy at different price levels. When prices fall, people want to buy more. When prices rise, the desire to buy decreases. It’s not mysterious—it comes from two things: the income effect, where when prices fall, buyers have more money left in their pockets, and the substitution effect, where when prices fall, this asset looks more attractive compared with other options.

The factors affecting demand are not just price. They include buyers’ income, the prices of other related goods, people’s tastes, the number of buyers in the market, and future price expectations. In addition, there are seasons, government policies, technology, and consumer confidence. What’s happening right now is a good example: the war in the Middle East has caused demand for oil to surge significantly because the main shipping routes have been closed.

Next, let’s look at supply, which is the desire to sell at different price levels. The law of supply is the opposite of demand. When prices go up, sellers are willing to sell more. When prices go down, sellers slow down their selling.

The factors affecting supply are also numerous. They include production costs, the prices of other goods that producers can produce as substitutes, the number of competitors in the market, technology, future price expectations, climate conditions and natural disasters, tax policies, exchange-rate volatility, and the ability to access capital.

A clear example is what happens in the Strait of Hormuz. When routes were shut down due to the Iran war, 20% of the world’s oil suddenly disappeared from the market. Meanwhile, energy usage demand remained the same, so prices jumped rapidly. This is what’s called a Supply Shock.

But the actual prices in the market aren’t determined by demand or supply alone. They are determined at the equilibrium point where the demand curve and the supply curve intersect. At this point, price and quantity tend not to change.

The reason is: if the price adjusts upward from equilibrium, sellers will sell more but buyers will buy less—so goods build up in inventory, pushing prices back down. Conversely, if the price adjusts downward from equilibrium, buyers will want to buy more but sellers will sell less—so goods become scarce, pushing prices back up.

Do you understand this? Because applying this principle in financial markets is crucial. In the stock market, for example, stock prices go up and down because buying and selling forces collide.

When good news comes out, buyers are willing to buy at higher prices, while sellers hold back from selling—so prices rise. On the other hand, when bad news comes out, buyers hold back on buying, and sellers are willing to cut prices—so prices fall.

In financial markets, factors affecting demand include economic growth, inflation rates, interest rates, liquidity in the system, and investor confidence. When interest rates are low, investors seek higher returns in stocks, which increases demand.

Factors affecting supply include company policies, such as share buybacks or capital increases, new company listings, and regulatory requirements. These factors work together and impact one another.

Now let’s talk about applying these principles to trading. Technical analysts use various tools to observe buying and selling pressure—such as looking at candlesticks. If the candlestick is green, it indicates that buying pressure is winning. If it’s red, it indicates that selling pressure is winning. If it’s a doji, it indicates that both sides have equal strength.

Looking at price trends also helps. If prices keep making new highs, it shows that demand is strong. If prices keep making new lows, it shows that supply is strong. If price movement stays within a range, it indicates equilibrium.

Support and resistance are also related to demand and supply. Support is the point where buying strength is waiting. Resistance is the point where selling strength is waiting.

There’s a technique called Demand Supply Zone, which is used to time buy and sell opportunities. When prices surge or drop quickly and then pause within a range, when new factors come in, prices will break out of the range and continue in the same direction—or reverse.

A bullish reversal is called DBR, which occurs when prices drop, pause, and then rise again. A bearish reversal is called RBD, which occurs when prices rise, pause, and then fall again.

There are also two types of continuation patterns. RBR means rise, pause, then rise again. DBD means drop, pause, then drop again.

In summary, demand and supply are not just economic concepts. They are the key to understanding how the market works. Traders and investors can use these ideas to analyze and predict prices. Learning this isn’t hard, but it requires practice and studying real price action so you can see the full picture.