I just got into the stocks market. AFAIK every transaction must have someone selling and someone buying, both thinking that they will be making money. How can both be making money?
Does that mean at least half of everyone in the stocks market will have to be losers?
In: 97
No, because the price could keep on climbing. It also depends on whether the stock eventually goes back to zero, leaving the last person who bought high holding the hot potato.
Example, I buy a stock of a new company that launched for $1 and the company does well, I sell it to you for $2. Then it keeps going well, and you sell it to your buddy for $4. Buddy sells it to Mickey Mouse for $8. Mickey sells it to Alice for $16. Alice sells to Joe Mama for $32.
So far, 5 people have made a profit. I only made $1 when, theoretically I could have sold directly to Joe Mama and made $31, but I did not LOSE money.
Anyway, the company turns out to be a scam and goes bankrupt, the stock price crashes to $0 and Joe Mama loses $32.
The amount of money ended up balancing out, but the number of people who lost money was not 50:50, it was 1:5.
In terms of retail buyers, the price didn’t even balance out. It’s negative – it started at $1 but went to $0.
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