The number one, and by far most commonly discussed law of the financial markets is supply and demand. When there is more supply than demand, price falls, when there’s more demand in the market, the price rises.

Whilst this might seem astonishingly simple, supply and demand permeates every aspect of financial trading, the key to being successful at spread betting or CFD trading is correctly estimating how a certain action is going to influence the various aspects of supply and demand.

Some are relatively straightforward. If there is conflict in the middle-east (for example, as was the case with the last Gulf War), it reduces the ease of getting oil out of the region, accordingly supply drops and the price rises. Therefore, if you’re trading on the oil price, increased political tensions in the region often lead to increased prices.

Some, however, are more complex. Precious metals like gold and silver reached all-time highs during the recent recession, but not for the most obvious reasons. It would be fair to assume that with an economic crisis going on, the last thing that people need are items like jewellery, so many people traded on the price of gold and silver to fall, working on the assumption that demand was going to drop out of the market.

What actually happened was quite different. Elsewhere in the financial markets, various things had gone into freefall, not least global share prices. Oil (often a haven of financial traders) dropped by nearly 70% whilst even government bonds looked a little shaky as governments propped up financial institutions.

The result of this was that suddenly something solid which has always been valuable, looked like a really good place to put money and the gold price went through the roof, which is roughly where it has stayed ever since.

Yet, on the high street, jewellery sales have been relatively subdued, in fact, more shops seem to be buying gold than selling it. This is because there is a difference between the obvious demand of the high street consumer and the financial demand of trading houses and institutions.

Supply and demand is absolutely fundamental, but estimating how events are going to have an impact on the relative supply or demand on a certain instrument or commodity is not easy, even seasoned professionals get it wrong, but it is the most powerful mover of any financial market and so you have to keep it in mind at all times.