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Sun Win
Mutually Assured Distraction
Posted - 2007.03.07 05:14:00 - [1]
 

In honour of passing a trading milestone (1 billion in personal assets \o/) I'd like to release to the Eve-O community a guide that I wrote when I'd just started playing and was still a nublet in Eve University. I've left it mostly unedited. It contains approaches to trading that I don't necessarily follow anymore but it helped me organize my thinking about trade when I was brand new and thought a wallet balance of 10 million ISK was enormous. Later E-Uni pilots have told me that it helped them, so I'm reporting it here in the hopes that it'll help you.

I also welcome any comments or advice from any other traders, master or newbie.

Hope you enjoy...

Sun Win
Mutually Assured Distraction
Posted - 2007.03.07 05:14:00 - [2]
 

Quote:
Hi everyone, I've only been in the corp for a little while, and I've already learned a ton about Eve from all of the excellent instructors. But I've noticed that there hasn't much in the way of market/trading type info. I'm still a new player so this is kind of like a 1st year's paper rather than gospel information about making ISK on the market but I think I'm doing pretty well for myself and I wanted to share what I've learned with everyone else, and hopefully get some tips out of the rest of you as well. Any feedback on ways I can make this better would be great.

In Part One (this one) I discuss the very basics of the Eve Market and give some advice that I think all pilots should consider.

In Part Two I discuss some of the core concepts of markets and profit that I've applied to trading in Eve.

In Part Three I talk about the Eve-specific techniques that I've been applying, where I got started and stuff like that.



PLEASE NOTE: When I talk about trading here I am talking almost exclusively about trading player items. NPC trade goods is an area that I have almost no knowledge of at all. I started out by trying to make a decent profit off of selling loot from missions and then kind of got carried away, so my experience is focused around the kinds of items that I've encountered, more or less at random.


Part One: What Everyone Should Know
For players with no interest in the market, these two things are all that you need to know:
-How to place buy orders in advance for things that you know you'll need.
-How to place sell orders for loot that you don't want so that you get the most ISK out of it.

Assuming that you've made it through the tutorial, you probably have some hazy recollection of the market screen when you bought that single unit of ammo or something from a station somewhere and then had to fly out to get it. It's very possible that since then you've never opened the market window except to buy things as soon as you needed them. You've probably also been selling things by right-clicking on them and selling them for whatever price the game shows you. This is a very expensive way to live!

If you've played other games, you are probably used to NPC vendors who buy things from you at one price and who offer things for sale at another price. There are NPCs who buy and sell things on the Eve market, but the vast majority of the trades happen between players. When you right click on that module that you have no use for and click "sell" some other player buys it from you and then uses it or resells it to someone else, probably at a profit. When you buy something, another player was probably selling it, and for more than they bought it from some other player. This is nice for them, but not necessarily the best thing for you.


Buy and Sell Orders
The way that these other players are able to profit from your buying and selling is through buy and sell orders. These are standing orders to buy or sell a certain item at a certain price. Every single one of us gets the ability to place up to 4 buy or sell orders at once without training any skill. Even if you have no interest in trading or making ISK off the market you should be taking advantage of buy and sell orders.

Sun Win
Mutually Assured Distraction
Posted - 2007.03.07 05:15:00 - [3]
 

Buy Orders
Take stock of your situation: are there certain consumables that you find yourself buying often? Ammo or drones for example. If there are, you should have a buy order up for this item.

-Set aside some ISK.
-Dock at your favourite station.
-Open up the market window, click on the search tab and type in a good chuck the name of the thing that you're using a lot of and hit "Search".
-Choose your item from the list. The market details will pop up next to the search box. It will look like a lot of numbers. Ignore them for now.
-Look for the part that says "Active Buy Orders" and then find the 'price' column. Click on that until it sorts the active buy orders by price from highest to lowest (this'll take one or two clicks, depending). The highest price on that list is probably lower than you are used to paying.
-Look for the button called "Place Buy Order" and click it. A window will pop up and there are a bunch of fields that you can fill in.
Choose the price that you want to pay (it should be lower than you are used to paying but higher than the highest active buy order), put in how many you want to get (for ammo, a big number is good here).
-Choose a range (that's how far you are willing to fly to pick it up - station is you want it to come to you - solar system to 2 jumps is what I suggest depending on how expensive the item is (I'll travel further for a new frigate than will for 100 Antimatter Charges).
For duration, always choose the maximum. If an order expires you lose your brokerage fee anyway and you can cancel at any time with no penalty beyond losing your broker's fee.

The game will calculate how much it'll cost you, the broker will tack on a fee and once you hit buy, the ISK will get taken out of your wallet and put in escrow (not to be confused with escrow missions). When some player right clicks on the 100 units of ammo that they didn't want and sells it, the ISK will come out of escrow and the ammo will come to you. The reason you chose a buy price slightly higher than everyone else's is because whoever has the highest buy order gets the goods.

With that done, you can go off and do some missions or take some classes or whatever you like to do while the broker buys up items on your behalf. You can keep track of where your items are located using the assets window. If you set your range wider than a single station, you'll find that your stuff is spread out all over the place. What I like to do is let things pile up for a bit and then every now and then, empty my cargo hold and do a quick collecting run to all the stations that have my items, fly them back to my home station and dump it all in my hangar.

You can monitor your buy order in your wallet window (check the orders tab). Sometimes you'll notice that your order isn't bringing in any items. This is probably from someone outbidding you.
-Bring up the market details on the item (use search or better yet, add the item to your market quickbar) and sort the buy orders from highest to lowest. If your order is not at the top of the list then you've been outbid.
-Check how many items the higher bidder wants. If it's a few, then you can probably wait it out. If it's a lot, then consider increasing your bid.
-Switch to the 'my orders' tab, right click on your buy order and choose 'modify order'. Put in a number that is higher than their bid and then click 'modify'. The broker will charge you another fee and the difference between your old bid and new bid will be deducted from your wallet.

If you are still the top bidder but you aren't getting any items, consider widening your range. Unfortunately, you'll need to put up a new bid to do this. You can cancel your old bid to get the ISK back (you'll lose the broker's fee though).

Sun Win
Mutually Assured Distraction
Posted - 2007.03.07 05:16:00 - [4]
 

Sell Orders
If you are a mission runner, you probably have a lot of random loot lying around in your hangar, or you have been selling it as fast as you get it. If it's lying around, then you have lots of ISK locked up in junk you don't need. If you've been selling it immediately, you've probably been selling it for less than it's worth.

Sell orders work the same way as buy orders, except that instead of wanting to be the highest bidder, you want to be the lowest bidder so that your sale will be the most attractive).
-Right click on the item you want to sell, choose 'sell this item'. A window pops up.
-Click "Advanced" and click the Magnifying Glass
-Sort the sell orders by price from lowest to highest (opposite of buy orders sorting).
-Choose a duration (the max duration is the correct answer here).
-Choose a number that's lower than the lowest number (it's probably higher than the price you would have been paid). The game will calculate the price by multiplying the price by the number for sale and then subtracting sales tax and a broker's fee. IMPORTANT: With very cheap items (i.e. ammo), it is possible that the resulting ISK number will be LOWER than your 'immediate' sell price would have been. In this case, do not place the order. Either sell the item the non-advanced way or wait to collect more of the item and then sell them as a batch.

You can monitor your sell orders the same way as your buy orders and modify them as needed, if you find that your items aren't selling.

For players with no interest in the market, that should cover all that you need to generally save yourself some ISK and pay for that shiny cruiser faster than most people. However, some of you will find yourselves getting frustrated with having only 4 buy/sell orders available or will find yourselves eyeing the large gaps between the lowest sell orders and the highest buy orders... For those players, pick up some of the trading skills (Trading and Retail are a good start) and join me in Part Two.

Sun Win
Mutually Assured Distraction
Posted - 2007.03.07 05:16:00 - [5]
 

Part Two: Concepts of the Marketplace
The way to make ISK in the marketplace is by buying things for one price and then selling them for a higher price. Anyone can do this, the question is whether you can do it at a rate that makes it worth your time. What you want to do is set things up so that you are making more ISK through buying and selling than you would have made by doing something else during that same period of time. There is no point to spending fifteen minutes making a sale that nets you 1,000 ISK when you could have collected 50,000 ISK in mission rewards and bounties instead.

How much ISK you are making as a trader depends on a few different factors. How much ISK did you start with? How much profit are you making on that ISK? How often are you making that profit? How much effort does it take to turn that profit? As you make decisions about what trades to make and which trades to ignore, there are some concepts that you need to understand so that you can think like a trader.


Working Out Your Profits
To work out how much profit you are making on a sale, take the ISK you take in from a sale, subtract the cost to buy it and then divide the result by the cost to buy it. Multiply the result is by 100 to get the percentage profit.

(Sale Price - Buy Price)/Buy Price x 100 = Profit%

For example, say you buy chickens for 150ISK, and sell them for 200 ISK. You are making (200-150)/150 = 50/150 = 0.3333 = 33.3% profit. Well, almost. You have to also factor in brokerage fees (1% each way) and sales tax (1% on the sale). A good rule of thumb is to just get the profit and then subtract 3 from it. This isn't exact, but it's a good approximation. So our trader is really making around 30.3% profit on those chickens. Not bad.


Compound Profits and the Rule of 72.
The nice thing about trading is that if you can avoid spending your profits, you can reinvest that ISK into more trades, earning even more ISK. Earning profits on your profits is a form of compound interest and it adds up very quickly. Imagine that you have 1,000 ISK and you are earning 10% profit on it every day. A week from now, you will spend all of your profits on candy for orphans. Trader B (your evil competitor) is making the same kinds of trades, but he is spending his profits on Exotic Dancers right away. After a week (7 days), let's compare the two of you.

You
Start: 1,000.00 ISK
Day 1: 1,100.00 ISK (1,000 + 100)
Day 2: 1,210.00 ISK (1100 + 110)
Day 3: 1,331.00 ISK (1,210 + 121)
Day 4: 1,464.10 ISK (you get the idea)
Day 5: 1,610.51 ISK
Day 6: 1771.56 ISK
Day 7: 1,948.72 ISK
Total profit: 948.72 ISK (94.9%)

Trader A
Start: 1,000 ISK
Day 1: 1,000 ISK +100 ISK of exotic dancers
Day 2: 1,000 ISK +200 ISK of exotic dancers
Day 3: 1,000 ISK +300 ISK of exotic dancers
Day 4: 1,000 ISK +400 ISK of exotic dancers
Day 5: 1,000 ISK +500 ISK of exotic dancers
Day 6: 1,000 ISK +600 ISK of exotic dancers
Day 7: 1,000 ISK +700 ISK of exotic dancers
Total Profit: 700 ISK (70%)

Thanks to your savings and reinvestments, you are now 248.2 ISK richer than trader A. In fact, by the time Trader A has 1,900 ISK, you will have 2,358 ISK. And when Trader A has reached 2,300ISK you will have reached 3,452 ISK. And when Trader catches up to 3,400 ISK (24 days from the start date) you will have 9,850 ISK!

A good rule of thumb for understanding compounding profits is the rule of 72. Take 72, divide it by the percentage profit you are making per unit of time (profit per day, per week, per month) and the result will be roughly how many units of time it will take to double your ISK. Using our candy for orphans example above, 72/(10% profit per day) = 7.2 Which is slightly over 7 days. The rule of 72 starts to break as your profit climbs past 25% but it still gives a good sense of how you're doing.

In other words, if you can earn a 10% profit every day in Eve (very easy) and resist touching any of that income, you will double your ISK every week.

Sun Win
Mutually Assured Distraction
Posted - 2007.03.07 05:17:00 - [6]
 

Speeding Up Your Earnings
As I said at the start, trading on the market is only really worth it if you are making ISK faster than if you were running a mission or mining or what-have-you. There are four main ways that you can do this. The first two are covered by the rule of 72. Increase the profit or increase the rate of turnover to shorten the time between your ISK doubling. You'll need to play around with finding a balance between sheer profits and the rate. Someone who is able to make 10% profit every half day will double their ISK every 3.6 days. Someone who is making 15% profit but only every day will double their ISK in 4.8 days. Sometimes it's better to make less profit faster.

The last two considerations are how much ISK you have to invest in trading (doubling 1,000 ISK is not nearly as impressive as doubling 10,000,000 ISK) and how much babysitting you have to do to keep the ISK flowing. For the first, you'll want to work on getting a good starting capital to invest in trading. I've found that running missions is a good way to start, and of course, taking advantage of the very generous Eve-U scholarships is a great way to get kickstarted. For the babysitting this all depends on how much time you want to spend staring at market data and how much time you are willing to spend hauling things between stations. That's really up to personal choice, but for me, I'd rather be out running missions or defending the Pill than hauling Civilian Afterburners 13 jumps.

The second nicest thing about trading (after compound profits) is that you can do it while you are doing other things. After you go to a station and set up a bunch of buy and sell orders you can leave and do a second activity and watch the ISK flow in from two sources at once. You'll be out in the asteroid fields, blowing up Veldspar and your broker will be busy buying and selling on your behalf. Let me tell you, it's very satisfying to have your wallet button blinking constantly, no matter what you are doing, as the ISK pours into your account.

In Part Three I'll talk about how I got started applying these concepts to Eve and some tips and tricks that I've learned.

Sun Win
Mutually Assured Distraction
Posted - 2007.03.07 05:18:00 - [7]
 

Part Three: Stuff That's Worked for Me
There are a lot of good trading threads in the Eve Official forums, but they all seem to give the impression that the people doing the trading are starting with enormous bankrolls. This is super intimidating if you are new like me. The other big problem with learning to trade is that everyone avoids saying where they are making their ISK for fear that there will be an enormous influx of competition and the market in that item will crash. The related problem is that there are a LOT of items for sale in Eve and it's very, very confusing if you're new. Browsing the market is an exercise in frustration as most items are out of your price range when you're getting started (heck, a frigate probably seems expensive). On top of that, you don't have much in the way of ISK to spare.

My solution to all of these problems is the same: Run combat missions (Security or Internal Security agents give a lot of these) and collect all of the loot. This means that you'll have to train up some combat skills but in my opinion it's totally worth it. Level 1 missions are generally very easy, they give you a steady flow of income (rewards +bounties) and a lot of research material. Find yourself a level 1 Security or Internal Security agent that's in a populous system (I've had a lot of luck in Oursulaert and, when I moved to Eve-U, Jita) blow up pirates and open every single loot can and haul whatever's inside it home.

After a few missions, you will have a hangar full of stuff that you don't want and some ISK set aside. The ISK is for making your first buy orders (you need to buy something in order to sell stuff). The reason you've been hoarding all of this stuff is that loot from level 1 missions is probably in your price range. It forms your first set of sales leads.


Figuring Out What to Trade/Healing the Market
Pick an item at random, ammo is a good place to start. Right click on it, and select "View Market Details" order the sell orders from lowest to highest and the buy orders from highest to lowest. In my opinion, this should be your default view of market details. What you are looking for is the percentage difference between the lowest sell order and the highest buy order ((sell minus buy)/buy). I am willing to bet if you are looking at random ammo that you looted, that this percentage is a very big number. If it's not, ignore it for now and move on to the next item in your hangar. Eventually, you will find something where the highest buy price is far below the lowest sell price. Big gaps between buy and sell orders is a indication of a place where the Market is broken.

Sun Win
Mutually Assured Distraction
Posted - 2007.03.07 05:18:00 - [8]
 

When I say that the market is broken, what I mean is that there is no clear agreement on the value of an item (how can a small shield booster be worth both 200 ISK and 5,000 ISK in the same place?). The Market wants to things to be bought and sold for more or less the same price. When you find a huge discrepancy between buy and sell orders (and you will) this means that someone is making insane profits at the expense of both the people selling to that person and the people buying from that person. As a trader, it is practically your duty to close that gap and bring the market to balance. The way you do this is simple: Place a buy order that is noticeably higher than the highest buy order and then when you have a bunch of the item, sell it for noticeably lower than the lowest sell order. This will have the effect of narrowing the gap (reducing profits) but you will be rewarded by being the one who buys and sells the most orders. If all goes smoothly, you will soon find yourself with a pair of open buy and sell orders with some percentage profit (15%-50% is a good amount - remember to subtract the broker fees and taxes!) between them. As your buy order gets used up, you will place a new one and the same for your sell order. It's not uncommon to look at your transactions and see right on top of each other two of the same item, one bought and one sold from two different people. Those people could have sold directly to each other but instead the item went through you and the difference between those prices went straight into your pocket!

The reason I suggest that you take a look at ammo first is that there are a lot of players like you who are going on missions and coming home with 100 charges of something-they-don't-use. Because ammo is so cheap, it's not worth putting up a sell order for it (the broker's fee often completely wipes out any benefit of putting up the order). So other traders will put up a buy order for some tiny price and catch hundreds of players' 100 ammo sales and then resell the ammo for 5 or even 10 times that amount. If you swoop in and buy the ammo for twice as much as the highest buy and half the lowest sell you will often still be making 100% profit on your trades. Yet you're doing everyone a service! The sellers aren't being completely ripped off and the buyers are getting better deals. Of course, this probably won't make the player with the buy and sell orders that you're ducking between very happy.


Trading is PvP
If you can stay as the highest buyer and lowest seller, you will become the only person in your area that is buying or selling that particular item (to what extent you will dominate your area depends on how far you are willing to travel to pick up your items and how many stations you are willing to put up sell orders in - on low ticket items people can be very lazy about getting good deals). If you dominate, don't expect the other traders to take this lying down. They'll fight you the only way they can - price increases on buy orders and price drops on sell orders.

You have two basic strategies for dealing with this.
1) Modify your orders to respond.
2) Get out of the market.

I strongly suggest option 1 - it's more fun!. If someone is buying for more than you or selling for less, this is a signal from the market that your prices are wrong. What you want to do is readjust your prices until the other trader decides that it's not worth it and moves on to some other item. Sometimes you will experience competition from only one direction, this is a signal from the market that you need to move your prices up or down. This is why I suggested leaving a big gap between the your prices and the ones you are beating. It gives you room to adjust up or down as needed. Other times you will get competition from both directions. This probably means that you were trying to earn too big a profit and some other hungry trader spotted a chance to beat you. Narrow your profit margin.

Sun Win
Mutually Assured Distraction
Posted - 2007.03.07 05:19:00 - [9]
 

The most annoying competition comes from people who beat your price by 0.01 ISK. They're hardly competing at all! In my experience the best way to deal with them is to respond by changing your price by a big number. Say you are buying Warp Core Stabilisers for 3,800 ISK and someone starts buying for 3,800.01. It's tempting to just go to 3,800.02, but then they will go to 3,800.03 and it'll go back and forth until someone gets bored (probably you). Meanwhile, you are wasting brokerage fees on every change. On the other hand, if you respond to 3,800.01 with 3,900 this sends a signal, which is that you're serious about staying in this market. My experience has been that after responding to .01 ISK increases with large numbers twice, those .01 ISK increases tend to go away.


Expanding Your Empire
Selling small ticket items can be very profitable and educational, but eventually you will reach a saturation point where your orders aren't getting filled fast enough. The optimal size of a buy or sell order is for an amount of items that will get filled 1 second before the next time you sit down at the station to check on your active orders. If you put up 10 Warp Scramblers for sale and the tenth is sold just as you dock, that's perfect. If you put up 10 and they sell out a day before you check on them, that's a day that someone else has been selling Warp Scramblers instead of you. If you put up 10 and come back to find 5, then that's 5 Warp Scrambler's worth of ISK that could have been invested in something else.

You'll never reach this perfect balance of buying and selling, but you will find yourself at times either selling items faster than you can buy them or buying them faster than you can sell. If things are selling to fast, consider raising your buy price to encourage more people to sell to you (the higher your buy price and the tighter your margins, the less people will be tempted to put up their own sell order for the item instead of selling through you). If things are selling too slow consider lowering your sell prices to make your items more attractive. If your buy AND sell orders are moving slowly, then you probably have too much ISK invested in that one item and it's time to look at diversifying into more markets. Go through your hangar of loot for more leads or try looking at the variations tab for items that you are already selling.


Getting Organized
Soon you will find yourself with a variety of different items for sale, with buy and sell orders ending at all different times and stuff spread out across a variety of stations. The first thing you should do when you stop being able to remember all of the items that you're buying and selling it start taking notes using the in game note pad. I suggest noting down the name of the item and your buy and sell price. As you adjust your prices, note the changes in there (leaving a history of price shifts).

For example here are my notes for Warp Core Stabilizers:
"Warp Core Stabilizer 2200 3200 now 2200 4900 now 2500 3900 now 2600 3900 now 2700 3900"

You can also leave yourself other notes: items to look into, prices in different regions if you travel, notes about planned prices. It's very useful to be able to log in, find a hangar full of Rail Guns you don't remember buying and to check your notes and see what you were planning to do with them.

Sun Win
Mutually Assured Distraction
Posted - 2007.03.07 05:20:00 - [10]
 

You should also consider using cargo containers. You can buy them on the market and you will sometimes get them as rewards for missions as well. Assembled containers can be named and I like to use them to separate out items I intend to keep from items for sale as well as separating out high, med and low slot items and ammo for when I'm fitting ships. I leave the main hangar for stuff I'm buying and selling (that's where it ends up by default) and use the containers to organize everything else.

I trained up to Industrial I but honestly have had very little use for a big hauler. I find that for the most part when you are dealing in modules and ammo that you don't need that much cargo hold. A decent frigate with a big cargo hold, some cargo expanders and an afterburner will be what you use most of the time to collect things from neighbouring stations and systems.

When you are deciding where to locate your main hangar, I suggest two things. First, find the most populous system in your region (or consider moving to a region with a very populous system) then in that system, pay attention to where the buy and sell orders come from. A lot of them will come from the same station. I highly suggest relocating to that single station. If most of the buy and sell orders are located there, then most of your business will happen there. I find that I will often put up a buy order for 50 items with a 2 jump range and that 45 of those items will get sold to me from within a single station with the other 5 spread out all over the place.


And that's my advice so far:
-Run combat missions and use the loot you find to narrow down your search.
-Look for huge gaps between buy and sell orders and plug them.
-Respond to 0.01 ISK price wars aggressively.
-Diversify your buy and sell orders.
-Take notes.
-Use cargo containers.
-Make your home in the most popular station in the most active system.


I'm sure there's lots more to learn (I haven't talked about trader alts or all kinds of things). But so far, I'm doing pretty well for myself. I can easily afford all kinds of frigates and fittings (I could probably afford a few cruisers if I wasn't reinvesting all my profits). When I first started playing a very nice player gave me 300,000 ISK for no good reason. I remember feeling like it was the most money, ever. Just over a month later, I find myself regularly not bothering to place a buy or sell order because it's "only" 300,000 ISK. Trading is a lot of fun and it's very easy to get in to. Give it a shot and share what you learn with everyone else!

Thanks for reading.

Erkor Shrakan
Minmatar
Matari Trade Inc.
Posted - 2007.03.07 06:01:00 - [11]
 

Very impressive document. I have no doubts it will aid beginning traders.

Kudos!

Shadarle
Posted - 2007.03.07 08:32:00 - [12]
 

This is the best trading guide I've seen. It actually gives away a ton of secrets, but in a form that most people won't realize unless they actually spend the time to do everything suggested. If someone follows this for a month and really works at it they will learn a lot... if they try to jump up high value items before they have really learned the market they will lose millions.

Start very small and stay small for a while, slowly working your way up. If you grow impatient you may just get burned by someone like me or another long time trader who has deep enough pockets to lose billions if it means they destroy their competition. Even most combat PvP'ers wouldn't be willing to risk billions of ISK like market PvP'ers do every day. So you better be ready for intense competition when you get to the big stuff.

Mihailo Great
Dublin Core
Posted - 2007.03.07 10:38:00 - [13]
 

reserved

Jade Grimpkin
The Sunshine Touring Company
Posted - 2007.03.07 11:27:00 - [14]
 

Edited by: Jade Grimpkin on 07/03/2007 11:24:03
Originally by: Sun Win
.
-Take notes.



Taking notes is so important. The amount of times i've seen a great market in a drunken haze (mutally incompatible statements, i know) and forgotten about it is depressing.

You can also make good money finding a smaller mission hub where a few lvl2s and lvl3s hang out. A nice steady stream of money to be made there. Good if you aren't a super hard core trader and don't have the time to constantly battle it out on the markets.

Ulrich Sternaxe
Posted - 2007.03.07 13:34:00 - [15]
 

Edited by: Ulrich Sternaxe on 07/03/2007 13:31:06

Originally by: Sun Win

-Respond to 0.01 ISK price wars aggressively.



Thank you for putting up this nice guide for newbie traders, I have one suggestion/comment though...

Please don't tell newbie traders to get into price wars like that, aggressive price wars only have losers, no wonder it took you so long to get your first billion ISK, you probably have been giving away lots of profits just to win at trade PVP Razz Of course opinions about this vary a lot from player to player, but no one can deny that even if you win an agressive price war that it's at a cost.

Competition is always bad, that's why companies always have secret price agreements in the real world (having some price agreements out in the open is often forbidden by law). There are no laws in Eve, so unspoken price agreements are very possible, that's what a 0.01 ISK undercut is, it's saying, look, I won't kill your profits, as long as you give me a few of your sales, then you can undercut me again with 0.01 ISK. Well, maybe it's not what most 0.01 undercutters are saying conciously, but the endresult will be exactly that (you WILL eventually be online at other times then your competitor, so you will be able to undercut him without response). Sharing a market is better then competing in a market, you can not drive a competitor out of a good profitable market, you can only make the market unprofitable (not worthwhile) to drive away your competitor, but then there's no reason to stay in the market yourself anymore and if you make your market profitable again new competitors (or the same one) will return again, so that won't do you any good.

Well, this is at least my opinion and how it works in the real world (I'm an importer and I do business with many large companies as well as small ones). I'm not sure if I'm right but at least I made my first billion ISK within 2 months, I don't know if that counts for anything and it's not meant as boasting. The wannabe traders reading this can decide which tactic they think is best.

Sun Win
Mutually Assured Distraction
Posted - 2007.03.07 15:50:00 - [16]
 

Originally by: Ulrich Sternaxe
Please don't tell newbie traders to get into price wars like that, aggressive price wars only have losers, no wonder it took you so long to get your first billion ISK, you probably have been giving away lots of profits just to win at trade PVP Razz Of course opinions about this vary a lot from player to player, but no one can deny that even if you win an agressive price war that it's at a cost.


You are right to bring this up as it's important that newer players realize that there are two different schools of thought on dealing with 0.01ISK increases. I personally stand by the aggressive strategy for a few reasons.

1) is that I am by no means a hard core trader, so I'm not interested in camping the market. One of the reasons that I love trade is that I can do it for as few as 15 mins and then go off and do something else and ISK rolls in. So for me I'd rather for the 0.01 ISK competitor to look hard at my (comparatively) small quantity and (comparatively) high buy price and decide "you know what, I'll let those 5 remaining orders fire and then I'll be on top.

2) I believe in the power of the freemarket economy and the invisible hand and I think that there is an inevitable equilibrium point to be reached, so why not accelerate the conversation until we reach it?

3) It may not force current competitors out but it discourages further competitors from jumping in. This is invaluable. It's one thing to have to compete with one or two other traders on a module. It's a whole other thing to have up to 15 other people checking at random points over the day and adjusting up by 0.01ISK... You'll never come out on top!

4)I'm kind of egotistical and it can be very satisfying to crash a market YARRRR!!

All that being said, I know that the aggressive vs 0.01SK debate is far from resolved and there are plenty of successful traders who fall on either side. So it's really up to the individual on what they think will work for them.

Shadarle
Posted - 2007.03.07 17:18:00 - [17]
 

Originally by: Ulrich Sternaxe
Edited by: Ulrich Sternaxe on 07/03/2007 13:31:06

Originally by: Sun Win

-Respond to 0.01 ISK price wars aggressively.

Please don't tell newbie traders to get into price wars like that, aggressive price wars only have losers, no wonder it took you so long to get your first billion ISK, you probably have been giving away lots of profits just to win at trade PVP Razz Of course opinions about this vary a lot from player to player, but no one can deny that even if you win an agressive price war that it's at a cost.

Competition is always bad, that's why companies always have secret price agreements in the real world (having some price agreements out in the open is often forbidden by law). There are no laws in Eve, so unspoken price agreements are very possible, that's what a 0.01 ISK undercut is, it's saying, look, I won't kill your profits, as long as you give me a few of your sales, then you can undercut me again with 0.01 ISK. Well, maybe it's not what most 0.01 undercutters are saying conciously, but the endresult will be exactly that (you WILL eventually be online at other times then your competitor, so you will be able to undercut him without response). Sharing a market is better then competing in a market, you can not drive a competitor out of a good profitable market, you can only make the market unprofitable (not worthwhile) to drive away your competitor, but then there's no reason to stay in the market yourself anymore and if you make your market profitable again new competitors (or the same one) will return again, so that won't do you any good.

Well, this is at least my opinion and how it works in the real world (I'm an importer and I do business with many large companies as well as small ones). I'm not sure if I'm right but at least I made my first billion ISK within 2 months, I don't know if that counts for anything and it's not meant as boasting. The wannabe traders reading this can decide which tactic they think is best.


I completely disagree with you Ulrich. You obviously do not trade in the same way as Sun. He is not a hardcore trader, he puts up a lot of orders and lets them get filled. He doesn't check them every second of the day... thus he cannot compete with under cutters. His only solution is to stop the under cutters by lowering/raising prices by a hefty amount. This is not a mistake, this is the correct practice for such a trader. I will do the same thing myself quite often, it tends to work out better than .01 raises from my experience.

You claim that sharing a market is better than competing for a market. I would say that removing your competition is better than sharing. If you cannot update your prices even close to as often as your competition then you've already lost... unless you change the rules, that is where those large price hikes come in. If your competition realizes you're willing to do whatever it takes to drive them out of the market, even if that means destroying massive amounts of profit each time they out-price you then they will disappear at least for a while. Then you have the market to yourself again... or minus a few competitors if it's a busy market.


Aggressively handling price wars is the only practice for someone who doesn't sit at the computer 23/7. I believe I've read that you have a bit of extra time on your hands Ulrich, thus you do not see things from the perspective of a 15/20 min per day trader. If you restricted yourself to such a time limit you may understand Smile

Pang Grohl
Posted - 2007.03.07 18:18:00 - [18]
 

Wow! That's comprehensive for beginning traders. Good job.

Jas Dor
Minmatar
Posted - 2007.03.07 20:57:00 - [19]
 

Well lets see, a few things:

1) What is trading in EvE? "Trading" is selling your market slots for a profit. For example lets say you're hauling in to Jita from say Aradia with items for sale. Without trade 1 you can place up to 5 five standing sell orders and no standing buy orders. Now lets say you have six items for sale, what are you going to do? Sell one to a reseller. The reseller will then turn around and sell the item to a third person. Don't want to mess with selling in Jita, again a reseller will pay you for the item and then sell it along.

How much sense does it make to fill a sell order on the market. Well it depends. Lets take for Example Type SS Cargo Expanders in Jita. Last time I checked there were standing buy orders of 12m and standing sell orders for 14m a 15% profit margin. Now lets look at Cargo Expander I, buy orders for 300isk sells for 8400isk or 2800% profit margin. Why would anybody want to get into Type SS when they could buy and sell Cargo Expander I? Market volume. You can't sell enough Cargo Expander I's in one day to equal the profit you could make in the same time selling Type SS. Now there's one more thing, once you are buying and selling Type SS having more trade slots buying and selling Type SS is unlikely to increase your profits (unless you're trying some kind of market manipulation). So why not get into Cargo Expander I's? What this means, the more trade slots you have the more money you have the POTENTIAL to make (margin trading comes in handy hear).

Jas Dor
Minmatar
Posted - 2007.03.07 20:58:00 - [20]
 

Edited by: Jas Dor on 07/03/2007 21:45:11
2) who are the other actors in the market? Besides buyers and sellers other market actors come in two types:

a) Producers, some but not all items can be player made (called "crafting" in most MMO's). In EvE this comes in two flavors, Tech 1 and Tech 2. Tech 2 is a world unto itself. Until invention becomes usuable it's not worht talking about.

Most player produced Tech 1 items are second to the bottom when it comes to items of that type (normally there will be a "Basic" version that provides less ability at a greatly reduced cost in Grid/CPU/Other ship system, usage). The basic, out of the box, BPO has a material wastage factor of 10%, research can cause this to drop. Most T1 produced items sell, in a hub, for within 10% of the price of their minerals at Material Efficiency Skill 5 (i.e. all or almost all profit is being made off the research on the BPO). Again this is a volume market. Some items don't sell for much but may have a daily turn over in the hundreds or thousands.

Market volume also influences price. A producer up to a point, can create his or her own items to meet demand. Where there is high turn over prices are lower and the difference is made up on volume. Where there is low turn over prices are higher. This comes with a caveat. Some regions are just dead. Check the price history. If there are twenty items on the market and price history is showing one sale a week go somewhere else.

There is also a subset of producers, compressors. A compressor buys minerals in a distant region, manufactures into something that takes less space, then hauls the items to market to sell. Could the compressor reprocess his goods and sell the minerals for a profit? Well the compressor dosn't have standing and may not have good refining skill. Why reprocess back when the goods are selling at Hub minerals price + a percentage at the local market.

Jas Dor
Minmatar
Posted - 2007.03.07 20:58:00 - [21]
 

Edited by: Jas Dor on 07/03/2007 21:52:33
B) Reprocessors: minerals are one of the best fungable commodities in EvE. Remember that Cargo Expander I being sold for 300isk. If that was the offer wouldn't you be tempted to reprocess it? A reprocessor is a player with good refining skills and standings. Simply enough they buy goods off the market, reprocess them, then sell the minerals. More than anybody else a reprocessor needs LOTS of market slots + margin trading skill. A reprocessor will put out low buy orders on a number of goods to convert into minerals. Reprocessors keep sell orders from slipping under the minerals price of the goods, instantly buying an item takes no trade slot and said item can very quickly be converted into easly liquidatable minerals. Even more than producers, a good spreadsheat is a requirement for reprocessors (except maybe the guy buying the cargo expander I's for 300isk, he's going to make money...if anybodies dumb enough to sell to him).


Apoctasy
Lethal Injection.
Hedonistic Imperative
Posted - 2007.03.07 22:58:00 - [22]
 

/sticky please

Sun Win, I sent you an evemail. Please respond :)

Bruno Bonner
Gallente
Lutin Group
Posted - 2007.03.07 23:21:00 - [23]
 

Edited by: Bruno Bonner on 07/03/2007 23:18:34
/me begs for Sticky

and this post can be removed by Moderators afterwards of course Wink

Lord XSiV
Amarr
Kodar Innovations
Posted - 2007.03.08 08:18:00 - [24]
 

Good job.

You start getting into mulplicative factors the more fluidity you have your disposal. It is pretty much the same as in the real world - with a million dollars you have much better earning potential on a percentage basis than say 1000 dollars.

Just like every profession in Eve, you can improve vastly using skills. Most players won't understand some of these concepts as nothing is directly price impact. Best skill by far is margin trading, which if timed with sell orders can result in a very large mulplicative factor.


ToranagaSama
Posted - 2007.03.08 12:51:00 - [25]
 

What a timely and apropos post. Thank you Sun Win.

Iíve got approximately 3 months and 4M skill points into Eve. From the very beginning itís been my intention to become a serious part-time Trader. Of course, there are a number of skills and skill sets that one must make a priority before embarking upon a Trader course.

Yet, almost from the beginning my loot was piling up fast. This along with my decision to mine as little as possible, led me to dabble into trading. Like most, I first just pressed the ďsellĒ button and took whatever price was offered, after all it was free money, or so I thought.

Then, becoming a little frustrated not making as much money as I had hoped; I took a closer look at the market window and noticed the sell orders selling for quite a bit more than the buy orders. Of course, for a newb, itís all a bit confusing, but one thing was certain, I needed to go to the station with the good (low) sell price and undercut that price so my loot would sell. I did this and for a short time had success selling my loot. Yet, again I still wasnít making as much money as I had hoped---but I was selling.

As I stated, trading was just a part-time activity, as I focused upon missions, though I just loved the thrill when money would just appear in my wallet from a sell of my loot---free money! Green became my favorite color.

As I said, I was selling though not making as much as I would have liked. This caused me to stop the under-cutting game and start attempting to price my loot in order to maximize the profit of each sale. This didnít work out too well, rather than maximizing profits, my loot stopped selling. My sell orders just sat there---expiring. Soon, whatever skill I naively came upon at under-cutting, I lost. I just couldnít price anything to sell. So I got out of the game. Figuring there was much I needed to learn and planned to come back to it at a later date. Meanwhile my loot just kept, and keeps, piling up!

So, now here I am again, but now things are looking a bit different. Whatís happened? Well, for starters----IíVE GOT TO GET RID OF THIS LOOT! Iím drowning in loot. Every now and then Iíd come upon some trading thread, and Iíd skim it and make mental notes. Then one day a couple of weeks or so ago, I stumbled upon a secret. Shhhh!

There is a certain ammo shall we say, that was rather expensive in the Space where I live. Also, and most importantly, there is a certain module that is essential to my ship setup, which is VERY expensive (for a relative newb) in my Space, as well as not being readily available.

So, frustrated, one day I set off to find a ready supply of cheaper ammo and a better price on that module. Wellll, what I found was remarkable, both the ammo and the module I discovered at a fraction of the going price in my Space. So, I did what any self-respecting budding Trader would do-----first I salivated---then I bought it ALL!

All the Ammo and all the available modules, the ammo isnít necessarily expensive, but the markup is well over 10 times the cost. The cost for the modules, even for a relative newb isnít very expensive, but the markup was astronomical. I put the ammo on the market and a couple of the modules too---they all sold, and I didnít undercut, rather I pushed the market price significantly higher. For those that use them, they are very necessary modules. After having sold out, my fear then was not being able to find more at similar costs to markup and sell. Well, I did, and today, after reading Sun Winís guide put in my first Buy order!!  Weíll see how that works out.

Volume in the modules isnít high, but the markup is, so Iím way in the black on the modules. The ammo though, is just sitting there. The previous sales went well, so this time I pushed the price up, maybe a bit too much, weíll see.

In any event, this budding trader has an issue, Pricing. I tend to lean toward maximizing price. For example, take the module, letís say I can buy the module for a 1,000 and sell it for 300,000. That is, buyers are there at 300,000. This is the price I choose to sell at, and Iíve sold all the previous inventory.

Now with this new inventory, I planned to sell at the same price, 300,000, but the problem is that there are 2 other sellers with orders, for example, at 2 x 200,000, and another at 100,000. These people are ridiculously under-cutting the market and for no good reason---IMVHO!

What should I do?

Iíll tell you what I did do, and would like opinions, I bought the 100,000 order, as well as one of the 200,000 orders. The other 200,000 order was set to soon expire so I left it.

Now, Iím still learning the market for this module, volume isnít high, but a few to several should sell every 3 days or so.

ToranagaSama
Posted - 2007.03.08 12:54:00 - [26]
 

I want to keep the sell price high, 300,000 or more, and if people would stop under-cutting there wouldnít be any problem. Everyone could sell and sell at the maximized price. So, now Iíve made a rule, for example, I will purchase and re-market any sell order that is 200,000 or less for this module----in order to maintain a maximized selling price (or try to). I still make a decent profit and maybe the other sellers will get the message-----plus time is saved as I donít have to pick up the item as the supply is several jumps away.

The problem is what if more sellers appear under-cutting me again, I can't keep 'buying-them-out' can I?

Also, Iím not sure about the length of time to keep the sell order up. So far, Iíve been setting for 2 weeks, but as Iíve stated the modules sell in a few days or so.

The question is what time length to set in regard to my competition? What messages are sent when setting for a week, 2 weeks, a month, etc.??

Iím still several weeks away from focusing upon Trading skills, but I do have Trade and Retail both at lvl 2. I think I should purchase Marketing and get that to lvl 4. I believe Day Trading is a bit too expensive at the moment. So thatís on the back burner.

Thank you in advance. Excellent guide, just what the doctor ordered.

Gartel Reiman
The Athiest Syndicate
Advocated Destruction
Posted - 2007.03.08 13:52:00 - [27]
 

Originally by: ToranagaSama
So, now Iíve made a rule, for example, I will purchase and re-market any sell order that is 200,000 or less for this module

The problem that I can see with that is that if these other traders are doing something similar to you, and picking up the modules for somewhere around 30k, then they're making a very good profit from you buying them out. If I was them, I'd be heading back to pick up the cheap modules and letting you buy me out for as long as you're prepared to do that. 600% markup with more or less guaranteed sales and near-infinite demand... that's an amazing trade run!

If they've priced their modules at 200k, then they're obviously happy to get that amount of profit off them. Now whether they sell directly to the end-buyers, or they sell them to you, they've made their 200k ISK and it's a job well done. In fact, if they don't look closely at their transactions tab they may not even realise that you're buying them out all the time, they'll just notice a large volumne of sales.

Now this isn't necessarily bad, but I think it's fair to assume that these undercutters will come back time and time again with however many goods they can lay their hands on. If you're on more or less constantly you could keep an eagle eye on the market so that you snap up all the offers and every end-buyer gets their 300k module from you. But you've also got to bear in mind that you're selling modules you sourced for 200k instead of 30k.

If there aren't that many competitors in the market for that module, and you see the same people undercutting every time (you can check so long as you keep buying them out) it might be worth getting in touch with them and seeing if you can come to some kind of agreement. Perhaps they have a valid reason for selling at that level, but if you let them know that the modules sell very nicely at 300k perhaps they'll agree to keep the market intact.

ToranagaSama
Posted - 2007.03.08 14:42:00 - [28]
 

Hello, thanks for the response.

Quote:
But you've also got to bear in mind that you're selling modules you sourced for 200k instead of 30k.


Precisely!

I checked the sellers to see if, indeed, I was being taken advantage of. Seven trades, 10 modules, and none of the trades show a duplicate client.

I've got a feeling that they were selling *loot*. Only 3 of the trades consisted of more than 1 module, 2x2 and 1x3. If they were sourcing, you'd think they would have been back by now.

---

Also, though I got a small inventory and (so far) a good supply, I'm placing them on the market just 1-3 at a time. Trying to stay incognito. Would it make any sense to place say 10 (or more)? I don't think so, as I'd just be undercut.

Anyway, thank you for the suggestions to contact the other sellers----so far its not appropriate, but something to keep in my for the future!! :)

Now, I need to find another spot or two, where I can sell at 1000+ markup. If I can then it'll be time to find a manufacturing partner??

Note: the prices are not the true prices, but numbers I use as examplars. 30k buy and 300k sell are close in relation though.

Lil Mule
Posted - 2007.03.08 17:33:00 - [29]
 

Edited by: Lil Mule on 08/03/2007 17:32:57
Edited by: Lil Mule on 08/03/2007 17:32:34
I'd like to note some very bad advice in this article:

1)The most annoying competition comes from people who beat your price by 0.01 ISK. They're hardly competing at all! In my experience the best way to deal with them is to respond by changing your price by a big number. Say you are buying Warp Core Stabilisers for 3,800 ISK and someone starts buying for 3,800.01. It's tempting to just go to 3,800.02, but then they will go to 3,800.03 and it'll go back and forth until someone gets bored (probably you). Meanwhile, you are wasting brokerage fees on every change. On the other hand, if you respond to 3,800.01 with 3,900 this sends a signal, which is that you're serious about staying in this market. My experience has been that after responding to .01 ISK increases with large numbers twice, those .01 ISK increases tend to go away.

Let me state this very clearly. You are not sending a signal, whether you are a hard core trader or not. The only thing you are doing is letting your emotions get the best of you, and limiting both your profit, and all of the otheres around you. In the time that I have been trading - I have NEVER been intimidated by large price jumps, as long as I anticipate that the market will not be completely saturated very shortly, and that I may continue making a profit.

This brings me to my second point for the new traders. For Manufactured items - be very very wary of this strategy (large jumps in buy order bids). Often times new traders dont understand that while a profit margin may be 100-200% on a given item AT THIS MOMENT, it will shift very very fast. In essence, by performing large jumps in the buy orders as this author is suggesting, you are bringing yourself potentially closer and closer to disaster.

For example - A item may sell for 200 000 isk right at this moment, and you can buy it for 100 000 isk - nice profit. A trader starts to increase their buy order by large amounts - lets say they post a buy order for 150 000, in order to 'heal the market' or to be aggressive, whichever is the case. Along comes Production Guru X and he first fills all of the buy orders that he feels meet his profit margin - and the 'market healer' gets his first at 150 000/unit. This may look good on the surface, until you notice that the amount of goods sold actually filled all of the buy bids down to 90 000 a unit. The Production Guru X then lists the remainder of his item at 120 000/unit to first swamp those people buying at 150 000/unit and also because he sells volume and wants to get rid of them fast. You've just lost a considerable amount of money - depending on the size of your buy order.

This does happen - so be very wary of performing large jumps in prices.

Furthermore - when you do tend to perform aggressive buy orders, often times the gap between the buy price and sell price can narrow to the point that its just too dangerous to continue trading on that item. One dip in the server population on a given day can put your purchase order under water. This often times takes a long time for the market to correct, especially if it is not a manufactured item.

Therefore - do not take this authors advice on the points mentioned above. Develop your own trading style - but more importantly, dont let your emotions get the best of you while trading. Use your logic - it will return more profits in the long run.

-LM


Pang Grohl
Posted - 2007.03.08 17:41:00 - [30]
 

Originally by: ToranagaSama
I want to keep the sell price high, 300,000 or more, and if people would stop under-cutting there wouldnít be any problem. Everyone could sell and sell at the maximized price. So, now Iíve made a rule, for example, I will purchase and re-market any sell order that is 200,000 or less for this module----in order to maintain a maximized selling price (or try to). I still make a decent profit and maybe the other sellers will get the message-----plus time is saved as I donít have to pick up the item as the supply is several jumps away.

The problem is what if more sellers appear under-cutting me again, I can't keep 'buying-them-out' can I?

Also, Iím not sure about the length of time to keep the sell order up. So far, Iíve been setting for 2 weeks, but as Iíve stated the modules sell in a few days or so.

The question is what time length to set in regard to my competition? What messages are sent when setting for a week, 2 weeks, a month, etc.??

Iím still several weeks away from focusing upon Trading skills, but I do have Trade and Retail both at lvl 2. I think I should purchase Marketing and get that to lvl 4. I believe Day Trading is a bit too expensive at the moment. So thatís on the back burner.

Thank you in advance. Excellent guide, just what the doctor ordered.



Whether or not you can continue to buy out under cutters depends on what you're selling, and the quantities they have available. A manufactured item could get you in trouble, because of the competition's ability to keep supplying the item at their chosen price.

Most likely your small quantity and short order time gives you the appearance of a loot seller. That can be a great advantage when your working with a manufactured item. This can get you ignored by manufacturers and full time traders. In the case of loot only items it's not as significant. In either case you're going to give the appearance of a supply scarcity.




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