Traderji,
Thanks for the answers. But your answers raise few more questions. Let me take the second answer of yours first.
Traderji said:
There are a number of reasons for the cause of fluctuation in the price of a stock. The primary being demand and supply which again are influenced by other fastors like earnings, future growth prospects, etc of that company.
Doesn't demand and supply means trading? If there is no trading on a stock, it should mean there is no demand and hence no supply. What if, I want to sell a share, but there are no buyers? What if I want to buy a share and there are no sellers? To my understanding, its a game of demand and supply. If both are zero, wouldn't the price of a share remain constant?
Let me take the first answer of yours now. I saw the thread of zero-sum game. There you are saying...
Traderji said:
The stock market is a nonzero-sum game. For example, I buy RIL for 375. I sell it a week latter for 385 to Stock Buyer-2. Stock Buyer-2 sells the same stock a week latter for 395. I made money and Stock Buyer-2 made money. No one lost money.
I think stock buyer-3 lost the money ! Doesn't he? Stock buyer-3 bought the share at 395 when the initial price of share was 375. We can't say that stock buyer-3 gained the money until and unless he sells the share to stock buyer-4 at higher price. In that case stock buyer-4 will lose money on the cost of buyer 1's, 2's and 3's gain.
Traderji said:
This same process can yield losses when for everyone when stock prices declines. If I buy RIL at 395 and sell it to Stock Buyer-2 for 385 and Stock Buyer-2 sells RIL for 375, then we both have a loss. Everyone lost money.
Based on the above logic, here I think stock buyer-3 gained the money.
Actually speaking, both the above questions are related to each other. I am sure, you are correct. But I am not sure whether I am wrong
. This has caused some more questions in my mind. I'll open a new thread for it. Otherwise things will become to hot to handle.