This sounds kind of rediculous, but I have been trading stocks through my Scottrade account now for about 8 months, but I have know idea how stocks work. I understand corporations, dividends, calcualting stock prices off of shareprice divided by earnings per share, etc.... But I have never really looked into where the money comes from. All I know is that I bought AIG for example at 55 and sold it at 69 and I recieved my money and everything is great. Now Im looking into buying some microcap stocks that are worth less then $2 a share. My question is this: If I buy a microcap stock for 50 cents and it goes up to $2 and I sell the stock, where does the money come from that I get back? These are tiny companies with limited assets and limited profits. If I invest $15000 and the stock shares climb and my total share values become $40000l, where does that $25000 in profit come from and how does it make its way into my bank account when I sell the stock? Does that come out of the microcap companies bank account? What if they spent all the money on R&D and there is nothing left? I just don't understand how I can make $25000 off a company that potentially has very little money and be guaranteed they are going to give me back my proceeds from the sale of their stock... Maybe someone can clarify this for me. Thank you in advance!