I just noticed that many people are still confused about demand versus supply. Although this is a basic topic in economics, it is actually the key to reading the market—whether it’s stocks, oil, or even digital assets. The prices we see are, in fact, the result of the back-and-forth between buyers and sellers.

Let’s understand the basics first. Demand (อุปสงค์) is the desire to buy goods at different price levels. The lower the price is, the more people want to buy. The higher the price is, the fewer people want to buy. This is called the Law of Demand, and it is always in effect. Supply (อุปทาน) is the desire of sellers to sell. The higher the price is, the more sellers want to sell. The lower the price is, the fewer sellers want to sell. This is the opposite direction of demand.

The important point is the equilibrium point, called ดุลยภาพ. This is the point where the demand line and the supply line intersect. The price and quantity at this point tend to be relatively stable. If the price rises above equilibrium, sellers will want to sell more, but buyers will want to buy less—leading to a surplus in the market. Prices will then be pushed down. On the other hand, if the price falls below equilibrium, buyers will want to buy more, but sellers will want to sell less—leading to a shortage. Prices will then be pushed up.

There are many other factors that affect demand in financial markets, such as investor confidence, interest rates, liquidity in the system, and expectations for the future. Supply, meanwhile, is influenced by company policies, new listings, and various regulations. These factors work together and often affect one another.

Now let’s look at how demand and supply affect stock prices and other assets. If a stock price drops, it indicates that supply, or selling pressure, is too strong. Conversely, if prices rise, it shows that demand, or buying pressure, is strong. In fundamental analysis, we view the demand and supply at work as stemming from the desire to acquire that business—not just the stock price. Factors that affect profit forecasts or the company’s valuation will also cause demand or supply to change.

In technical analysis, we use demand and supply to infer buying and selling strength in the market. We use tools such as candlestick patterns: when there are green candles (closing higher than opening), it indicates that demand is strong, while red candles (closing lower than opening) indicate that supply is strong. And when the price keeps making new highs, it means demand still has strength. In contrast, if the price keeps making new lows, it means supply still has strength.

A commonly used technique is the Demand Supply Zone, which is used to time trades. There are two main types. The first is reversal trades, such as Demand Zone Drop Base Rally, which occurs when price plunges and then consolidates in a range; when a new factor appears, price breaks out above the upper range and then reverses into an uptrend. Another is Supply Zone Rally Base Drop, which occurs when price rises and then consolidates; when a negative factor arrives, price breaks below the lower range and then reverses into a downtrend.

Trend continuation trades happen more often, such as Rally Base Rally in an uptrend, where price rises, pauses, and then continues higher; or Drop Base Drop in a downtrend, where price falls, pauses, and then continues lower.

Understanding demand and supply isn’t that difficult, but it requires hands-on testing and studying how price moves. When we can see the “battle” between buyers and sellers in each candlestick and each moment, we’ll better understand why prices move in that way. From there, we can predict the direction of prices more accurately.