When stock prices rise or fall sharply - everything is driven by the law of demand

In the stock market, have you ever wondered why a stock sometimes suddenly moves higher unexpectedly or drops sharply? The reality is that all these behaviors are governed by two fundamental principles - supply and demand. If you understand these principles well, you will be able to read the market and catch trading opportunities more accurately.

Why Investors Need to Understand Supply and Demand

Most successful investors view the market through the lens of imbalance - that is, when supply and demand are not equal. When there are many buyers but few sellers, prices keep rising. Conversely, when there are many sellers but few buyers, prices break down. Anticipating supply and demand before others becomes the key to profit.

Demand (Demand) - Genuine Buying Interest

What is demand? Simply put, it is the desire to buy stocks at different price levels. If the price is low, more people want to buy. If the price is high, demand decreases. This is called the Law of Demand.

In financial markets, factors driving demand are not just price but also:

• General Liquidity: When interest rates are low, large amounts of money flow into the stock market, increasing demand.
• Investor Confidence: Good news, strong earnings, or growth forecasts attract buyers.
• Number of Consumers: If new investors or funds signal they will buy, demand is supported.

Supply (Supply) - The Other Side of the Same Coin

If demand is the buyers, supply is the sellers. It is the quantity of stocks that sellers are willing to offer at each price level. The Law of Demand that states the opposite does not apply here - when prices are high, sellers are eager to sell more.

Factors affecting supply include:

• Company Policies: Capital increases via IPOs or share buybacks change the number of shares in the market.
• Production Costs: If costs are high, companies will reduce offerings.
• Number of Competitors: When new companies go public, the reference volume of stocks in the market increases.

Equilibrium - The Point Where True Price Occurs

Demand + Supply = Market Price at the true equilibrium point.

When the price is above the equilibrium point:

• Sellers want to sell a lot
• Buyers delay buying
• Result = Excess supply → Price drops

When the price is below the equilibrium point:

• Buyers want to buy a lot
• Sellers delay selling
• Result = Excess demand → Price rises

Equilibrium is not a fixed point; it changes with new factors.

Can You Use Supply and Demand in Actual Trading?

Yes, and this is exactly what professional traders do today.

1. Reading Candlestick Charts (Candle Stick)

• Green candle = Close price higher than open price = Demand wins → Price continues upward
• Red candle = Close price lower than open price = Supply wins → Price continues downward
• Doji (Open and close at the same level) = A stalemate between supply and demand → Uncertain direction

2. Support & Resistance (Support & Resistance)

• Support = Level where buyers are interested = Demand is here
• Resistance = Level where sellers release shares = Supply is here

Demand Supply Zone traders use this technique to find points where prices move rapidly and then create a base for consolidation, then enter when the price breaks out.

3. Typical Market Scenes (

• Demand Zone Rally Base Rally )RBR(: Price rises → consolidates in a range → rises further )Demand wins(
• Supply Zone Drop Base Drop )DBD(: Price plunges → consolidates → drops further )Supply wins(
• Demand Zone Drop Base Rally )DBR(: Price drops → consolidates → reverses upward )Switch from supply to demand(
• Supply Zone Rally Base Drop )RBD(: Price rises → consolidates → reverses downward )Switch from demand to supply

Fundamental Factors and Supply & Demand

If you think everything is just about candlesticks — wrong. Good fundamental analysis helps anticipate changes in supply and demand before they appear on the chart.

• Strong earnings → Analysts raise target prices → Demand increases → Price rises
• Economic risks → Investors start selling → Supply increases → Price drops
• Strong economic data → Interest rates rise → Money flows out of stocks → Demand weakens

Summary

Supply and demand are not just distant economic theories; they are present in every price movement with divine guidance. If you learn to view the market through this lens and combine it with good fundamental analysis, your investment decisions will become clearer and more precise.

Grab a notebook and start tracking support and resistance on stock charts. Study why prices stop at those points. It’s divine guidance — learning through practice at its best.