if every stock transaction has a buyer & seller, does that mean 50% of the people will always be losing money?


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

The person selling is making a profit if they bought at a lower price. The person buying is thinking they will make a profit in the future when they sell, or via dividends. They aren’t making money in that moment. But there’s no reason to think either of them is a loser. It’s not a zero-sum game.

The person who sold might have gotten the stock a long time ago and it increased in value well, so they make money. The person who bought receives an item that is worth the amount they spent, so they didn’t lose money. Even if the stock price goes down they haven’t lost money, although their worth has decreased. The stock can increase in price and the buyer can then sell for a profit. And then later that buyer could sell for a higher price, and so on. It’s only really a loss if you sell at a lower price than what you bought.

You said you just entered the stock market. You didn’t lose money when you bought your first stock. The person who sold the stock you bought may or may not have sold at a profit. You can’t be sure.

Similarly, when you sell that first stock you bought, it is likely to be bought by a person who hasn’t owned that stock before. The only winner/loser is you, and you can’t know the other party’s financial position

I haven’t done the specific math to be sure, but the above two cases should show that it’s not a zero-sum game

Yes to an extent they are zero sum. Someone is usually going to be losing out there. There isn’t necessarily a loser in every transaction but there always is losers in aggregate. For example, there were tons of suckers that bought PTON (peloton) at 171.09 per share (ATH) and are significantly underwater and will likely never recover their money. A better example of a zero sum game is options markets, there’s always a winner and loser on every trade.


They can both make money. If I hold the stock for 10 years while the value rises from $10/share to $30/share, then sell it to you and you hold it for 10 more years while it rises to $50/share, we both make money. I just make mine 10 years before you do.