Currently, many people may wonder why asset prices keep rising and falling continuously, even without major news coming in. The truth is, most price movements come from demand and supply forces, which are fundamental powers driving all markets, whether stocks, energy, gold, or even digital assets.

In fact, demand and supply are just the desire to buy and sell, but if you understand them more deeply, you'll see that they are the most important mechanisms in determining prices. When there are too many buyers and few sellers, prices will go up. Conversely, when the situation reverses, prices will go down.

Let's understand this in detail. Demand is the desire to purchase goods at various prices. If you plot it on a graph, you'll get the demand curve, which shows how many units buyers want to purchase at each price level. Conversely, the maximum price they are willing to pay to obtain a certain quantity of goods is the basic rule. When prices rise, demand decreases; when prices fall, demand increases.

There are two reasons for this. The first is the income effect: when prices decrease, your real purchasing power increases, so you can buy more. The second is the substitution effect: when prices drop, this good becomes cheaper compared to alternatives, so more people switch to buy this product.

Demand isn't solely dependent on price; it also depends on income, preferences, the number of consumers, future price expectations, and even factors like seasons, government policies, technology, and consumer confidence. For example, during a galactic war where transportation routes are shut down, oil demand skyrockets.

On the supply side, it is the desire to sell goods at various prices. The supply curve indicates how many units sellers want to sell at each price level and the lowest price they are willing to accept to sell a certain quantity. The basic rule of supply is opposite to demand: as prices increase, sellers want to sell more; as prices decrease, they want to sell less.

Supply depends on many factors, such as production costs, prices of alternative goods, the number of competitors, technology, price forecasts, climate conditions, tax policies, and access to capital. For example, when the Strait of Hormuz is closed due to war, about 20 percent of the world's oil flow immediately disappears from the market. This is a supply shock that causes oil prices to spike rapidly.

However, the actual prices in the market are not solely determined by demand or supply. They occur at the equilibrium point where the demand and supply curves intersect. At this point, prices and quantities tend not to change. If prices rise above this point, sellers will increase production, but buyers will purchase less, leading to excess inventory and a price correction downward. If prices fall below this point, buyers want to buy more, but sellers want to sell less, leading to shortages and a price rebound.

In financial markets, assets like stocks can be viewed similarly to natural commodities. Therefore, demand and supply graphs can be used to estimate prices. From a fundamental analysis perspective, stock prices rise or fall driven by demand and supply forces. A falling price indicates strong selling pressure; a rising price indicates strong buying pressure.

However, in reality, demand and supply are not generated by the stocks themselves but by the desire to acquire the companies. Stock prices reflect the market value of a company, and factors affecting profit forecasts or company valuation will influence demand or supply. For example, quarterly earnings forecasts, economic growth expectations, or restructuring of the company.

From a technical analysis perspective, traders use various tools to measure buying and selling strength. One popular method is analyzing candlestick charts. If a candlestick is green (closing price higher than opening price), it indicates buying dominance. If red (closing lower than opening), it indicates selling dominance. If it’s a doji (opening and closing at the same level), it shows equal strength on both sides.

Assessing price trends is also crucial. If prices continually make new highs, it shows strong buying momentum. If they keep making new lows, it indicates strong selling pressure. If prices move within a range, it suggests a balance between buyers and sellers.

Identifying support and resistance levels helps in forecasting. Support is often where buying interest is concentrated; prices tend not to fall below this level. Resistance is where selling interest is strong; prices tend not to rise above this level.

A popular technique is the Demand Supply Zone, which looks for moments when price loses balance and tends to oscillate to find a new equilibrium. During this phase, prices may surge rapidly or plunge sharply, then move in that direction until a new balance is found.

Trading with this technique involves two methods. The first is trading at reversal points, such as Demand Zone Drop Base Rally, which occurs after a sharp decline followed by consolidation. When buying interest returns strongly, prices break above the range and turn bullish. Traders can enter on breakout signals.

The second method is trend-following, such as Rally Base Rally, where prices rise, consolidate, then continue upward, or Drop Base Drop, where prices fall, consolidate, then continue downward. Persistent trends are more common than reversals.

Understanding demand and supply principles provides powerful tools for investors and traders. Whether used in fundamental or technical analysis, the ability to read demand and supply charts and anticipate imbalances can help you make better investment decisions. Learning this is not difficult; it just requires practice, real-world application, and studying actual asset price movements. The more you study, the clearer the picture becomes.