If stock prices go up or down, they are ultimately driven by these two forces.

Stock market prices fluctuate due to many reasons, but in reality, they all stem from two fundamental forces: demand (buying interest) and supply (selling interest).

When buyers outnumber sellers, prices tend to rise. Conversely, when sellers exert more pressure than buyers, prices plummet. This system isn’t as complicated as it seems, but you need to understand how these two forces actually work.

What is Demand? A Simple Explanation

Demand refers to the quantity that buyers are willing to purchase at various prices.

Imagine: If the stock price of ABC drops from 100 baht to 80 baht, many investors will think, “Now it’s cheap, I should buy.” If the price then rises to 120 baht, people might worry, “It’s too expensive, better to wait.”

Law of Demand: Low price → high demand | High price → low demand

Why is this the case? There are two main reasons:

1. Income Effect — When the price drops, you have more money left after buying this asset, allowing you to purchase a larger quantity.

2. Substitution Effect — A lower price makes this asset more attractive compared to other similar options.

Besides price, other factors influencing demand include:

• Income and wealth of buyers
• Personal preferences in the market
• Total number of consumers
• Future price expectations
• Market news and confidence

Supply: The Seller’s Side

Supply refers to the quantity that sellers are willing to offer at various prices.

Sellers have a mindset opposite to buyers: if prices are high, they are willing to sell more because profits are better. When prices are low, they reduce the amount they are willing to sell.

Law of Supply: High price → more willingness to sell | Low price → less willingness to sell

Other factors affecting supply include:

• Production costs (refers to the original cost for major shareholders)
• Prices of alternative products that producers can switch to
• Number of competitors
• Technology
• Market price expectations

Market Equilibrium: The Meeting Point

The actual market price isn’t just a random number; it is where demand and supply curves intersect (called equilibrium).

Think:

• If the price jumps above equilibrium → sellers rush to sell more, but buyers pull back → excess supply → price drops back to equilibrium.
• If the price falls below equilibrium → buyers rush to buy, but sellers reduce sales → shortage → price rises back to equilibrium.

This system functions like a self-balancing scale. When someone tries to unbalance it, it naturally restores itself.

Real Financial Markets: Not So Simple

In real stock markets, demand and supply are influenced by many factors:

###Demand side (:

• Monetary policy — Central banks lowering interest rates encourage more investment in stocks instead of saving money.
• Market liquidity — The amount of money circulating affects trading directly.
• Investor confidence — If economic prospects look good, investors buy more; if they are wary, they sell off.

)Supply side ###:

• Corporate policies — Companies engaging in share buybacks or issuing new shares change the supply.
• New listings — IPOs increase supply.
• Regulations — Sometimes large companies cannot freely sell shares and must wait.

Demand and Supply as Price Prediction Tools

Technical analysts use these principles constantly:

( 1. Price Action and Candlesticks

• Green candle )closes higher than open( = buyers win, strong demand
• Red candle )closes lower than open### = sellers win, strong supply
• Doji (open and close at the same level) = indecision, unclear

( 2. Support and Resistance

• Support = levels where many buyers are waiting )demand(, preventing price from falling further
• Resistance = levels where many sellers are waiting )supply###, preventing price from rising higher

( 3. Demand Supply Zones )Trading Setups( Professional traders use these techniques to lure in:

DBR )Drop-Base-Rally### — Price drops sharply > consolidates in a base > breaks out upward → buy at breakout point

RBD (Rally-Base-Drop) — Price rises sharply > consolidates in a base > breaks down → sell at breakdown point

Real Market Example

Suppose last year stock XYZ:

• Priced at 100 baht, normal demand
• News: major competitor IPOs, increasing supply → XYZ drops to 70 baht
• Market sees the low price + good news → demand explodes → rises to 120 baht
• Company announces another big IPO + major shareholders want to realize profits → supply increases → drops to 85 baht

An astute trader observes:

• From 70 baht, it rose to 120 baht in an uptrend (before DBR)
• At 120 baht, many sellers appear, forming a Supply Zone (resistance)
• Price then breaks down to 85 baht, completing an RBD pattern → profit of 35 baht (from 120 to 85)

Why This Matters to Investors

1. Better price prediction — Understanding why prices move helps you choose better entry and exit points.
2. Avoid panic — When prices suddenly fall or rise, you won’t panic because you understand it’s due to demand-supply imbalance.
3. Ignore superficial news — Whether news is good or bad, if prices fluctuate sharply, analyze what demand and supply are doing.
4. Trade systematically — Proceed with a plan based on these principles rather than impulsive guesses.

Summary

Demand (buyers come in) and supply (sellers come in)— these two forces form the core of the market. Price movements are simply the result of these forces battling; whichever side wins, the price moves in that direction.

Once you understand that more buyers mean higher prices, more sellers mean lower prices, market analysis becomes much easier. Find support and resistance levels, study Price Action, and practice trading. Gaining experience will make you more proficient.