Supply And Demand

Supply refers to the quantity of an asset available, while demand represents the amount people are willing to purchase.

When the supply of an asset increases, its value typically decreases. On the other hand, if supply decreases, the asset’s value tends to rise. Similarly, as demand for an asset increases, its value rises, and as demand falls, its value declines.

This principle also applies to the currency market, where traders often analyze the supply and demand of a currency to predict whether its value will rise or fall.

In financial markets (such as stocks, forex, and commodities), supply and demand also drive prices. In Forex market, the value of a currency is determined by how much demand there is for it relative to its supply. If demand for a currency is high (because investors expect the economy to grow), its value will increase.

In Stock market, the prices are affected by the balance between supply (how many shares are available for sale) and demand (how many buyers want to purchase those shares). If there is a high demand for a company’s stock (because of good earnings reports or favorable news), the price will rise.

So in the context of financial markets, understanding supply and demand can give traders and investors insights into potential price movements.