Why do the prices of your assets on Gate.io fluctuate? You need to understand supply and the meaning of supply.

Have you ever noticed that the price of stocks or tokens that follow them tend to spike sharply in one direction and then reverse violently? Such movements are not mere coincidences but are driven by fundamental market forces known as supply and demand, which are key mechanisms that enable traders and investors to predict and respond accurately to price changes.

What are Supply and Demand?

Simply put, Demand (Demand) is the desire to buy, while Supply (Supply) is the desire to sell. When you see prices rising, it usually means more buyers than sellers; when prices fall, it indicates sellers have more power.

To clarify further, consider the demand and supply lines:

• Demand line shows the inverse relationship between price and quantity purchased: the higher the price, the fewer people want to buy; the lower the price, the more people want to buy.
• Supply line shows a direct relationship: the higher the price, the more sellers are willing to offer; the lower the price, the less they are willing to supply.

When these two lines intersect, the (Equilibrium) price is established.

The actual market price balances demand and supply. If the price rises too high, buyers will reduce their demand while sellers increase their supply, leading to excess inventory and a downward pressure on price. Conversely, if the price drops too low, buyers will increase their demand and sellers will reduce their supply, causing shortages and upward price movement.

Factors Driving Supply in Financial Markets

Demand (Desire to Buy)

Macroeconomic factors: Economic growth, interest rates, and inflation all play roles. When interest rates are low, investors seek higher returns in risk assets, filling the stock market with buyers.

Liquidity: Increased money supply in the system → more funds available for investment → higher demand for assets.

Confidence: Good news, earnings forecasts, or positive political situations → people are willing to buy → prices go up.

Supply (Desire to Sell)

Corporate policies: Issuing new shares increases supply; buybacks decrease supply.

Initial Public Offerings (IPOs) (IPO): New companies entering the market → new securities flooding in → increased supply, which may pressure prices downward.

Regulations: Silent periods or restrictions on major shareholders’ sales affect supply.

What You Can Observe on Candlesticks

No need to overcomplicate—just look at candlesticks:

• Green candle (Close > Open): Buyers (Demand) won the day.
• Red candle (Close < Open): Sellers (Supply) won the day.
• Doji (Open and Close nearly the same): Neither side has a clear advantage; the market may be indecisive.

Using Demand and Supply Zones in Trading

A popular method is to identify points where the price moves rapidly and then consolidates within a range, then follow two main patterns:

1. Reversal (Reversal)

Example of an Uptrend (DBR - Drop Base Rally):

• Price drops sharply → lots of sellers
• Consolidation occurs → buying interest enters (looks cheap)
• Price breaks above the range → buy signal with stop-loss below the breakout

Example of a Downtrend (RBD - Rally Base Drop):

• Price rises quickly → lots of buyers
• Consolidation occurs → sellers start to dominate (looks expensive)
• Price breaks below the range → sell signal with stop-loss above the breakdown

2. Trend Continuation (Continuation)

Uptrend continuation (RBR - Rally Base Rally): Price rises → consolidates → continues upward (buying pressure remains strong)

Downtrend continuation (DBD - Drop Base Drop): Price declines → consolidates → continues downward (selling pressure remains strong)

Why Is This Important for Investors?

Whether you use fundamental analysis (fundamental analysis) or technical analysis (technical analysis), supply and demand are the true mechanisms driving prices.

• Fundamentally: Good news arrives → people want to buy that company (demand increases) → stock prices rise.
• Technically: You analyze support/resistance levels and trends—all of these are interpretations of supply and demand.

Understanding where buying and selling pressures originate is what separates successful traders from those still captivated by the numbers on their screens.

Summary

Supply and demand are not complex equations but are about observing the fundamental forces of the market. The more you think about “why are people buying?” and “why are people selling?” the better your trading plans will be. Of course, understanding the theory and applying it practically to asset prices are two different things. Practice analyzing real candlestick charts often, and you’ll start recognizing patterns and making better decisions.