Mastering Supply and Demand for Better Stock Trading

The Excitement of Limited Supply!

Before we jump into the exciting world of stock market investing and trading, it's important to understand the key force that drives all markets—supply and demand. This basic idea is like the heartbeat of the stock market and almost every other market out there. By understanding this simple but powerful concept, you'll be able to make better choices and feel in tune with how the market moves. Think of it as finding the rhythm that moves market trends—once you feel it, you can make it work for you.

Imagine walking through the busy streets of Divisoria. You hear people talking everywhere, and you can smell delicious street food all around. As you move through the lively market, you see a vendor selling a small collection of handmade leather shoes. Each pair is beautifully made, and people start to notice. Soon, there's a crowd of people wanting to buy them. But here's the catch: the vendor only has 50 pairs.

As more people want the shoes, the vendor realizes they can raise the price because the high demand means buyers are willing to pay more for the limited supply. This is what happens when demand is higher than supply: too many buyers, not enough shoes. And when more people want them, prices go up.

The Stock Market: A Similar Story

The stock market works in a similar way. Imagine a company releases a cool new gadget. News spreads quickly, and investors rush to buy shares, causing the stock price to go up. The high demand creates excitement, just like the leather shoes, and makes investors act quickly, sometimes without thinking clearly, which can make prices rise even more. But what happens if the gadget doesn’t sell as well as expected, or if a competitor releases something even better? Suddenly, everyone wants to sell, and the stock price drops as supply becomes higher than demand.

Here is an illustration of a line chart when Demand exceeds Supply: (Price goes up)

When Supply Exceeds Demand

Now, think of the opposite situation. A local shoe company makes 1,000 pairs of sneakers, thinking they will be very popular. But they made a mistake—by the end of the season, they’ve only sold half. With more sneakers left than interested buyers, they have to lower the prices and offer discounts to sell the extra stock. This is what happens when supply is higher than demand: more products than buyers, leading to lower prices and losses.

Here is an illustration of a line chart when Supply Exceeds Demand : (Price goes down)

The Importance for Investors

Understanding how supply and demand work in the market is very important for Filipino investors. If you notice that a local brand's eco-friendly product is getting a lot of attention, you can expect the stock price to go up and invest at the right time. But you also have to watch for changes—like a competitor releasing a cheaper version—that could change things.

By learning to see these patterns, you can make better choices, take advantage of opportunities, and avoid surprises. Supply and demand aren’t just market buzzwords—they are the keys to understanding the ups and downs of investing.

How Investors Can Apply These Learnings?

Now that you understand how supply and demand influence the stock market, the next step is to put this knowledge into action. One of the best ways to stay on top of market trends and make informed investment decisions is by using a tool that offers real-time insights and trading opportunities—like the SBX app.

With SBX, you can track the supply-demand dynamics of different Philippine stocks by knowing its real time price. This gives you the chance to act fast, whether you’re capitalizing on rising prices or finding bargains when supply exceeds demand.

Don’t miss out on the chance to leverage these market movements. Download SBX now for free through Google Play and App Store, and start applying your new understanding of supply and demand to grow your portfolio today!

If you want to learn more about SBX, you may visit our website.