I am fairly new to investing (6 months) so I may not have a full understanding of this. Please correct me if I’m wrong as I would like to learn!
A crash occurs when everyone liquidates at the same time. If everyone theoretically added a mere $1 to the market per day, they would have more money to invest, in turn increasing demand for a stock, in turn increasing the price. Following this model, I don’t see why growth would ever have to decrease (other than day to day which will be addressed in a minute).
Now, I also understand that if everyone is adding money and wanting to buy, but no one is selling, there would be no change in trade volume. It IS necessary that people are still willing to buy and sell each day as price is determined by supply and demand. However, I have an example that I again believe would combat this:
Assume we have three traders: John, Jessica, and James. Assume the ticker is called $X and is currently trading at $5. John buys one share of $X for $5. The next day he sells his share for $5.01. The price increased because both Jessica AND James wanted to own a piece if this company. On day three of the market being open, John decides to buy $X again for $5.01. Jessica and James want to increase their position so they buy additional shares at $5.01. Since multiple shares have been bought at this price, the price per share increases to $5.02. John sells his share and again makes $0.01 profit (assuming no commissions).
I understand that this is not a real scenario, but in a perfect world (ceteris paribus) why isn’t this possible? I have been trying to wrap my head around this topic, but I can’t think of any reason as to why this isn’t possible for slow, but steady growth in the stock market.
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