When the demand to buy exceeds the supply, market momentum begins to rise.

In the world of investing, nothing is more important than understanding how prices move and the main drivers are the forces of two sides—those who want to buy and those who want to sell. When these forces are unbalanced, prices begin to change, and for smart investors, reading these imbalance signals is equivalent to finding golden opportunities in the market.

Buying and Selling Power vs. Price Movement

The price of any stock or asset is not determined by the company or regulatory agencies but is set by the balance between two forces: the first is the number of people wanting to buy (demand), and the second is the number of people wanting to sell (supply).

When more people want to buy than want to sell, the market is short of goods. Buyers must pay higher prices to acquire the assets, causing prices to rise. Conversely, when more people want to sell than want to buy, inventories increase, and sellers must lower prices to attract buyers, causing prices to fall. This basic concept is called demand (Demand) and supply (Supply).

What is Demand (Demand)?

Demand is the quantity of goods that consumers or investors want to buy at various price levels. The fundamental law of demand states that when prices fall, demand increases, and when prices rise, demand decreases. This is an inverse relationship.

Why is this the case? Because when prices decrease, your money becomes more valuable (income effect). You can buy more with the same amount of money. Additionally, when this asset becomes cheaper, it looks more attractive compared to similar goods (substitution effect).

Factors influencing demand are diverse, such as the buyer’s income, market confidence, prices of substitute goods, consumer preferences, the number of buyers, and future price expectations. Sometimes external factors like seasons, government policies, or macroeconomic events also influence demand.

What is Supply (Supply) and How Does It Work?

Supply is the quantity of goods that producers or sellers want to offer at various price levels. Unlike demand, the law of supply states that when prices rise, the willingness to sell increases, and when prices fall, the willingness to sell decreases. The relationship is in the same direction.

Why is this? Because higher prices mean higher profits from sales. Producers want to produce and sell more. Conversely, when prices drop, profits decrease, and producers are less inclined to offer goods for sale.

Factors affecting supply include production costs, prices of alternative goods, the number of competitors, production technology, and future price expectations. Climate, tax policies, exchange rates, and access to capital also have impacts.

The Equilibrium Point: Where Prices Decide

Demand and supply are not important just by themselves but at the point where they meet—(Equilibrium). This is the place where prices tend not to change because demand equals supply.

If prices rise above the equilibrium point, sellers want to offer more, but buyers purchase less, leading to excess inventory. This exerts downward pressure on prices, bringing them back to equilibrium. Conversely, if prices fall below equilibrium, buyers want to purchase more, but sellers offer less, leading to shortages, which pushes prices upward back to equilibrium.

In Financial Markets, Buying Power Is Most Important

In stock or financial asset markets, understanding demand and supply is just as crucial as in general goods markets. When stock prices rise, it indicates that demand exceeds supply; buyers have more power. When prices fall, it indicates that supply dominates; sellers have more power.

Factors influencing demand in financial markets include macroeconomic conditions, interest rates, liquidity in the financial system, company performance, investor confidence, and future expectations. Sometimes news, political events, or even market sentiment can impact these.

Factors affecting supply in the stock market include the policies of listed companies (such as capital increases or share buybacks), new listings, regulations, and stock exchange rules.

How Analysts Use This Law

###In Fundamental Analysis(

Investors using fundamental analysis look for changes in the intrinsic value of a company. When they see that a company is likely to grow better, demand for its shares increases. When warning signals appear, demand decreases. Earnings forecasts, growth rates, and financial structure all influence demand and supply.

)In Technical Analysis###

Traders use various tools to measure demand and supply, such as:

1( Candlestick Reading )Candles)

• Green candles (close higher than open) indicate buyer strength
• Red candles (close lower than open) indicate seller strength
• Doji candles (open and close near the same level) suggest a balance between both sides

2( Trend Tracking )Trend)

• If prices make new highs, demand remains strong
• If prices make new lows, supply remains strong
• If prices fluctuate within a range, both sides are balanced

3( Support & Resistance )Support & Resistance)

• Support is the price level where buyers are waiting to purchase (demand)
• Resistance is the price level where sellers are waiting to sell (supply)

Trading Strategies Using Demand and Supply

( Case 1: Price Reversal )Reversal###

Uptrend (DBR - Demand Zone Drop Base Rally) Prices drop rapidly until buyers see it as undervalued. They start buying, causing the price to stop falling and form a base. When good news arrives, buyers regain strength, and prices break upward. Traders can enter short positions at the breakout point.

Downtrend (RBD - Supply Zone Rally Base Drop) Prices rise quickly, and sellers see an opportunity to offer. Prices stop rising, form a base, and when bad news arrives, sellers regain strength, pushing prices down. Traders can enter short positions at the breakout point.

( Case 2: Continuation of Trend )Continuation###

Continued Uptrend (RBR - Rally Base Rally) Prices rise, form a base, and with positive news, continue upward. Buying power remains strong.

Continued Downtrend (DBD - Drop Base Drop) Prices plunge, form a base, and with negative news, continue downward. Selling pressure remains strong.

What Investors Should Remember

Demand exceeds supply is not just a basic economic principle; it is the core of price movements in financial markets. Investors who can read these imbalance signals will be able to predict price directions more accurately, whether through fundamental analysis, technical analysis, or a combination of both.

However, this knowledge must be accompanied by practice, real price observation, and continuous learning from the market because markets are constantly changing, and new lessons are always waiting.