Understand demand and supply to precisely time stock trading.

Have you ever wondered why stock prices go up and down? And why it’s possible to predict trends? The answer lies in a single fundamental force: buying demand and selling pressure, also known as supply and demand, which is the main mechanism driving financial markets.

Why is understanding Supply and Demand important?

Experienced investors don’t just look at financial statements or wait for news updates. They focus on actual buying demand in the market. The prices we see in trading apps are the result of the clash between buyers and sellers every second.

Supply and demand are fundamental concepts because they not only explain the economic world but also serve as tools that help traders make timely buy or sell decisions.

What exactly are Supply and Demand?

What is (Demand)?

From the buyer’s perspective, buying demand doesn’t just mean wanting to buy; it’s the quantity of goods that buyers are willing to pay for at various prices.

Imagine: if a stock is priced at 100 baht, there might be 1,000 buyers. But if the price jumps to 150 baht, perhaps only 500 buyers remain. This is the “law of demand,” which states that as price increases, buying demand decreases.

Why is this? There are two main reasons:

1) Actual income effect - When prices rise, your money “buys less.” If you had 10,000 baht before, now you can only buy 66 units instead of 100 units.

2) Substitution effect - When a stock becomes more expensive, investors might choose to buy other, cheaper stocks.

Besides price, buying demand is also influenced by other factors such as:

• Investors’ income
• Market confidence and future price expectations
• Company performance and news updates
• Number of investors entering the market
• Monetary policies from financial institutions

What is (Supply)?

On the seller’s side, selling pressure is the volume of stocks owners are willing to offer at various prices.

The key difference is: when prices rise, selling pressure often increases ( opposite to demand ), because sellers aim to sell at the highest possible price.

Example: if a stock is priced at 100 baht, the owner might be willing to sell only 500 units. But if the price rises to 150 baht, they might be willing to sell up to 1,000 units.

Factors affecting selling pressure include:

• Production and operational costs
• Future price expectations ( If expecting prices to rise, sellers might hold back )
• Company policies on share buybacks or capital increases
• Market competition
• Access to funding for business expansion

The equilibrium point is where the price “settles”

Looking only at demand or supply alone isn’t enough to determine the stock price. The actual market price occurs where the demand and supply curves intersect, called the equilibrium point (Equilibrium).

At this point:

• The quantity buyers want to buy equals the quantity sellers want to sell
• Price and volume tend to stabilize ( until new factors come into play )

If the price moves above equilibrium → sellers increase, buyers decrease → goods don’t sell well → price is pushed back down.

If the price drops below equilibrium → buyers increase, sellers decrease → shortages occur → price is pushed back up.

Factors that truly change the stock market

In financial markets, changes in buying demand and selling pressure are not just abstract numbers. When the economy is strong, companies are profitable, and interest rates are low → buying demand for stocks increases.

Conversely, when the economy slows, companies report losses, or negative news emerges → selling pressure intensifies, and investors exit the market.

Additional factors include:

• Liquidity: When new listings come in, selling pressure increases, while share buybacks reduce it.
• Confidence: Investors confident that prices will rise tend to buy more, fueling demand.

How to time trades using demand and supply

1) Observe buying and selling pressure through candlesticks (Candlestick)

Green candlestick (Closes higher than open) → Buyers win → Strong buying demand

Red candlestick (Closes lower than open) → Sellers win → Strong selling pressure

Doji (Open-close are close) → Uncertain battle between buyers and sellers, no clear winner

2) Follow the price trend (Trend)

If the price continues to make new highs → Buying demand remains strong → Price likely to rise further

If the price continues to make new lows → Selling pressure remains strong → Price likely to fall further

If the price moves within a range → Supply and demand are balanced → Wait for the next direction

3) Find support and resistance levels (Support & Resistance)

Support = a level where buyers are waiting (with strong demand) → Price unlikely to fall below this easily

Resistance = a level where sellers are waiting (with strong supply) → Price unlikely to rise above this easily

Demand Supply Zone trading technique

A popular technique based on this principle is Demand Supply Zone, which involves two types of entries:

Reversal trading (Reversal)

Demand Zone (DBR) - Price drops sharply then reverses upward:

1. Price falls strongly (due to excess selling)
2. Consolidates within a range along a certain price level
3. When good news or new factors appear → buying interest returns → price breaks upward

Supply Zone (RBD) - Price rises sharply then reverses downward:

1. Price rises strongly (due to excess demand)
2. Consolidates within a range
3. When negative news or new factors appear → selling interest returns → price breaks downward

Continuation trading (Continuation)

Bullish continuation (RBR) - Price rises → pauses → rises again

Bearish continuation (DBD) - Price drops → pauses → drops further

When price consolidates in a range, traders can enter orders at breakout points (when the price breaks the range), setting stop-losses to protect themselves.

Practical application in investing

Understanding demand and supply doesn’t mean you can trade with 100% accuracy, because markets are influenced by many other factors. But it helps investors:

✓ Understand the actual price movements ✓ Better predict trend reversals ✓ Make systematic decisions on when to enter or exit ✓ Avoid impulsive trading based on emotions

For beginners, start by observing buying and selling pressure from candlesticks and price trends. Gradually learn more complex techniques once you see how the market moves. Practicing with real money (or a demo account) will give you more experience than just reading theories.