If people make money in stocks and crypto by buying low and selling high, who is buying the stocks from they are high, and why?

Question

Let’s just say for example, I bought a stock at $10. Then it goes up to $500

I can obviously make a profit, but why would someone buy it at such a high price?

Is it like the person who buys it at $500 is hoping that it will go up to $1000, then the person who buys it at $1000 hopes it will go up to $1500, and so on?

In: Economics

Answer 1

Easy answer: There are winners and losers. And keep in mind the [Greater Fool Theory](https://en.wikipedia.org/wiki/Greater_fool_theory). Whenever you sell something at a profit, there’s always a bigger fool who’d buy it from you, and this continues until the price is so high that even the biggest fool knows it’s overpriced, and at that point the price goes down again.

Sometimes people buy a security for other reasons than to make a profit directly on the price of that security. It may be a hedge or a spread strategy, where you are making or losing money on the differences between prices of multiple things and you don’t care about whether prices rise or fall, you just care if the difference widens or narrows.