open All Channels
seplocked Market Discussions
blankseplocked Experiment #01: RL finance analysis applied to EvE
 
This thread is older than 90 days and has been locked due to inactivity.


 
Pages: [1] 2 3 4 5 6 7 8 9 ... : last (11)

Author Topic

Vaerah Vahrokha
Minmatar
Vahrokh Consulting
Posted - 2010.08.28 23:21:00 - [1]
 

Edited by: Vaerah Vahrokha on 29/04/2011 19:37:57
Last update and introduction

Due to readers feedback, this thread has vastly surpassed its original scope.
It started as a limited, expert audience experiment and it turned into a sort of course for everyone.

To help a casual reader grasp the first elements needed to understand this thread I suggest looking at this comprehensive, ground zero starting course at Babypips.

For those who desire to embrace the fascinating but dangerous world of trading, these are must read books: Reference.

Child threads:
Dedicated to Dr. Eyjólfur Guđmundsson: Market Poetry: more in depth tools and analysis.

Experiment #03 On demand game market data and graphs: everyone may get the advanced tools and data I use to improve their trading.

----------


Today I am pleased to announce the birth of a new company wholly dedicated to high level financial instruments: Vahrokh Financial Technologies [VAHFT]

This will be an attempt at finding possible ties between how a real economy / market works and EvE's own system and then how to profit from them (the juicy part) Wink.

The first phase would be about finding possible patterns of similarity between a RL market price action and EvE's.
A very vital consideration first: EvE's charts don't show a true price, nor are tick based.
They provide a daily price median that may be used as approximate replacement and also some simple moving averages. Due to its short period, the 5 SMA shall be used as approximation of price action to figure out an analysis and areas of interest.
The actual price instead will be used as proper trigger once such an area has been found.


Today's experiment is easy: look at a price history graph and look for obvious clues.


Two randomly chosen items have been picked up: Nitrogen Isotopes and Gallente Starbase Charts.

The first test is: "is it possible to notice evident classical patterns on EvE's charts"?


Let's start simple and look at Nitrogen Isotopes.

Does this graph tell us something coherent?


Picture linkage

Well, apparently it shows some huge rise and subsequent decline of the isotopes.
Could it be analyzed more, by using RL technical analysis techniques?

A 3 minutes edit and it appears in a somewhat more descriptive way!

Picture linkage



Most will easily have recognized one of the most known financial analysis patterns, called "head and shoulders".

With my MS Paint uber skills I have but highligthed the price forming the pattern (in cyan).

Here's further information about it:

Linkage

Of course Wikipedia is a very entry level documentation, so if someone are interested at more in depth knowledge I urge them to look for one of the zillions sites listing this and more information.




Let's have a further look at the picture. As for classic analysis I have also drawn a couple of green lines to show the price trend (line at the bottom) and other lines show how we can indeed find a proper "neckline" (see documentation above) and that it's aligned with the trend.
Furthermore, this is a particular kind of head and shoulders called "multiple shoulders", in fact there are two necklines.

The red arrows - exactly like in RL technical analisys, show how someone back the time when we were at the top of the head could already know how far the price would have dropped later, in fact head and shoulders often yield a similar delta in price between top of head and neck vs neck to underlying bottom.


To be continued...

Hexxx
Minmatar
Posted - 2010.08.28 23:37:00 - [2]
 

I do swing trading in RL if I trade at all, using simple channels during relatively constrained trading...but I did learn something about the technical patterns your establishing here.

And I say you are awesome. Keep it up. ugh

Breaker77
Gallente
Reclamation Industries
Posted - 2010.08.28 23:38:00 - [3]
 

\o/

I had wondered where you had disappeared to. It's been forever since I've read a wall of text that had no useful content to it.


Hooded Hauler
Posted - 2010.08.28 23:44:00 - [4]
 

Why are you doing this? We already have a full time eve economist.















(that's right I'm going there)

Vaerah Vahrokha
Minmatar
Vahrokh Consulting
Posted - 2010.08.28 23:51:00 - [5]
 

Edited by: Vaerah Vahrokha on 02/09/2010 05:29:21
Edited by: Vaerah Vahrokha on 29/08/2010 10:23:19
Now that somehow it appears that we could really find a pattern (A PATTERN IN MY EVE!), let's look at something more complex: the Gallente Starbase Charts.


At first the graph looks like a random mess:

Picture linkage

Removed image that was already linked as a URL - Adida


What can we figure out of this mess? First of all, like in price action analysis we can easily notice how the prices tend to follow exactly the same ways they do in RL finance.

The so-called BRNs (Big Round Numbers) tend to be used amazingly often to mark prices. I.e. it's easier for someone to want to ask / bid for 2.5 than for 2.47. Therefore it's possible to see a price distribution that favors those kinds of numbers.
Furthermore, prices tend to find certain levels where they are hard to push through. Those levels are called pivot lines. If a price attempts dipping below such a line, it's usually rejected. Likewise, if the price approaches such a pivot line from below, it will be probably rejected down.
Pivot lines are easily drawn: where there's a lot of recurring similar prices spanning for a long time then there's probably a pivot line.

Why does this happen? Simple. Huge orders - you can see them IE for Tritanium - are hard to smash through therefore they provide for a price wall, exactly like in RL.

Finally, prices tend to clump around mathematical points of interests. Some of the most used are known as Fibonacci Retracements.


Now, let's look at the picture with all of the above in mind. I have drawn obvious pivot lines in cyan.


Picture linkage

Removed image that was already linked as a URL - Adida


Notice how they neatly touch the round numbers? Notice certain recurring (yellow dots) prices form pivot lines?
Notice how the price distribution is not senseless, but shows an increasing density towards the center of the graph, in a mathematical alike fashion?
I have not drawn Fibonaccis over the graph, MS Paint has some limitations regarding that.

Anyone can already imagine how to profit from that?


To be continued...

Vaerah Vahrokha
Minmatar
Vahrokh Consulting
Posted - 2010.08.29 00:07:00 - [6]
 

Edited by: Vaerah Vahrokha on 02/09/2010 05:29:50
But why should we stop here? Just because it's awesome? Of course we won't!

Let's look at the graph closer. What could we see? More patterns that neatly fit with those pivot lines!

I have highlighted a new picture with the first 3 obvious financial patterns that are used to make money:


Picture linkage

Removed image that was already linked as a URL - Adida

The cyan pattern is exactly the same we have seen before. Another head and shoulders.
I have also drawn yellow lines to show its neckline and how it fits neatly with a bearish sub-trend.
Notice the volumes underneath, they are finance textbook examples about how demand and supply work in RL securities analysis.

The blue pattern is a classical "break out" pattern, where a large supplier basically played retail demand big time. This is the visual representation of a large market manipulation.
This is a complex, multi-phase pattern that will be analyzed in depth in a next post.

The light green pattern all to the right is a double bottom or W. It's the pattern the economists talk and spread fear about when they talk about world economy. In fact we could be at the center of a W (the central tip of the letter) and therefore next to us there's a further, steep descent into further recession before we climb up again.

To be continued...

Marshiro
Posted - 2010.08.29 00:39:00 - [7]
 

Edited by: Marshiro on 29/08/2010 01:30:06
God, a chartist. I hope your quant-wannabe (you'd love to be a quant, but too lazy) ways result in more violatility and blow up on hidden risks one day, but to bad eve do not punish leveraging. (need margin calls for this kind of ****)

It is always possible to extract any number of perfect or not so perfect fits to past data, but this very ability means it is also rather not much better than blind guessing. While I don't just throw efficient market hypothesis around, I think the weak form is pretty likely. Though, given the small market in Eve and very logarithmic utility wealth of isk limiting both market size and survival of "successful" strategies, there might be a small space, but with every trader trying innate chartist principles and evolving to find items, it would be at the "edge of effectiveness" where any market that offer insane chartist potential would quickly be under competition using the same method. A chartist may have a small advantage (over the blind flipper), but only marginally.

Hexxx
Minmatar
Posted - 2010.08.29 01:03:00 - [8]
 

Originally by: Hooded Hauler
Why are you doing this? We already have a full time eve economist.

(that's right I'm going there)


What VV is doing is considered financial voodoo, it has nothing to do with economics and everything to do with market pricing psychology and pricing patterns.

Scott McClellan
Forum Posters Anonymous
Posted - 2010.08.29 02:13:00 - [9]
 

Edited by: Scott McClellan on 29/08/2010 02:14:29
I've personally been rather interested in the mechanics driving market forces in this game, it's nice to see someone show some of the patterns commonly used and explain them a bit. However, I'm used to having some of the more in-depth technical analysis information (that the Eve market simply doesn't make available) at hand, and I'd like to see CCP add some of this to EVE (even though I'm probably too dumb to benefit from it :P). Thanks for showing us all this VV.

I was screwing around with a spreadsheet trying to build bollinger bands around the Nitrogen isotopes but I think MATLAB might be more suited to it, there's a bunch of things I'd like to do here that I can't or don't know how, and I've been plugging away for a couple of hours.

At any rate, if you would like an *approximate* spreadsheet of the market value of that item (ripped from the API data on EVE central) over the past year, I've put it up for download. I can't guarantee the accuracy of the information, but I can say what I did.

- Most of the API data is stripped out, to save space. All orders of quantity under 1000 were removed (95% of the orders were for 1 unit).

- This data originally contains all regions, I restricted it to The Forge only.

-"Weighted average price" is useless in that sheet, I couldn't figure out how to apply it in any way that would help, and was my own calculation.

-On the 2nd page of the worksheet, the prices are averaged by date and charted (as well as sales volume by that date), this chart looked *similar* to the first one VV posted. However I believe this one only tracks when an item (>999 items) changed hands, not standing market order prices.

-It's fairly poorly made, I just basically learned how to do the filters and datapilot stuff tonight, I don't do spreadsheets on this scale all that often (it was originally ~12 columns and 45000 rows).


If it can help you at all maybe it wasn't a total waste, lol.

Linkage

As always I would advise anyone who downloads a file to scan it first, TMK my computer doesn't have any malware on it, but it never hurts to make sure.

Alak D'bor
Syncore
Posted - 2010.08.29 02:22:00 - [10]
 

Originally by: Marshiro
Edited by: Marshiro on 29/08/2010 01:30:06
God, a chartist.

It is always possible to extract any number of perfect or not so perfect fits to past data, but this very ability means it is also rather not much better than blind guessing.


Amen. Too many RL get-rich-quick investment seminars centre around this nonsense.

To make better money in RL markets than through managed funds, you must be smarter than they are, and that takes some doing. One way is to become an expert in a sector. It takes months of research and years of refining your knowledge, but that's the only way really to get enough of an edge over your competitors to pull ahead of the trading fees and volatility.


CantStopThe Rokh
Trader's Academy
manufacturing disaster
Posted - 2010.08.29 02:45:00 - [11]
 

This is actually really interesting and I am curious what else you come up with.

I think the main problem you will run into in doing this however is that people in the real world operate with certain guidelines and fears and such things in mind. Eve players really aren't that bothered by this because it is perfectly alright for them to (for example) sell PI goods at a loss to themselves in the longterm. Not to mention some of the more basic fundamentals of economics are tossed out the window when dealing with something like Eve.

Like I said though, this promises to be an interesting projected and I am eager to hear/read more.

Caleb Ayrania
Gallente
TarNec
Posted - 2010.08.29 06:45:00 - [12]
 

Awesome stuff VV..

@Hexxx. Last I checked economy was ALL about an abstract extension of human psychology, so in that regard Voodoo, actual or figuratively, is extremely relevant and worthwhile. Imho even more so then most statistic number crunching that is basically "dead" and always conclude there is no "cause" but itself..

Keep it up VV:. When is Elliot waves coming?


Lucyna
Interstellar Killer Bee Enterprises
Posted - 2010.08.29 06:53:00 - [13]
 

Originally by: Caleb Ayrania
Awesome stuff VV..

@Hexxx. Last I checked economy was ALL about an abstract extension of human psychology, so in that regard Voodoo, actual or figuratively, is extremely relevant and worthwhile. Imho even more so then most statistic number crunching that is basically "dead" and always conclude there is no "cause" but itself..

Keep it up VV:. When is Elliot waves coming?




I don't think Hexxx was criticizing the analysis in RL or VV's, in fact, he seems to support VV's arguments whole-heartedly. He gave it the label Financial Voodoo not to demean the work but to categorize it.

I like what's going on here. It's easy enough to model long-term effects, but if a trader could spot short term patterns, investment profits could go up quite substantially (the investor would no longer use the buy-and-hold strategy but a technicaly sound short-term strategy.

Basically, I think it's going to take a ton of research on many markets to confirm human psychology in real markets and in Eve are similar enough to apply RL strategies to Eve, but it looks promising thus far.

Nikolai Kondratiev
Sphere Design Inc.
Posted - 2010.08.29 07:27:00 - [14]
 

Edited by: Nikolai Kondratiev on 29/08/2010 08:05:53
But isn't technical analysis based on the fact that it's largely used and thus working mostly because it exists ? i.e a support price is only reliable because enough people believe it is a support price and will start sending buy orders when price reach it, expecting price to bounce back up, and effectively making it go up.

Not saying it doesn't work (I certainly can't deny it after seeing someone get like 10k€/month on his own, with 90%+ of profitable trades, by using only technical analysis) or that it's voodoo (Laughing) but I doubt it can seriously be applied to Eve (at least because of the pain of exporting the data to some analysis-friendly software, and thus not many people relying on it, or because of the higher % of irrationnal market players in a virtual world)

Caleb Ayrania
Gallente
TarNec
Posted - 2010.08.29 07:48:00 - [15]
 

Soz.. I might have read more tone into the Voodoo connotation.

@ Nikolai

The economist mentioned is ofc our little dr E. He actually promised me that ccp would look into taking the database out of the game and grant us access for data mining and analysis. OFC this was one of these "Soon" promises, that we rarely hear......

If we ever got this done and naturally kept a fog of war delay of 5-7 days, then a lot of interesting work could be done on the data.


Mme Pinkerton
The pink win
Posted - 2010.08.29 08:14:00 - [16]
 

Originally by: Nikolai Kondratiev
at least because of the pain of exporting the data to some analysis-friendly software, and thus not many people relying on it

You can export the price data of the last year on a per-item basis via the market history tab using a cache reader.

It is possible (and some ppl have done it in the past) to feed this data into software for technical analysis.

For older data you can use the eve-central API.

PS: Kondratiev waves in EVE? Discuss. Very Happy

Caleb Ayrania
Gallente
TarNec
Posted - 2010.08.29 08:34:00 - [17]
 

Originally by: Mme Pinkerton
Originally by: Nikolai Kondratiev
at least because of the pain of exporting the data to some analysis-friendly software, and thus not many people relying on it

You can export the price data of the last year on a per-item basis via the market history tab using a cache reader.

It is possible (and some ppl have done it in the past) to feed this data into software for technical analysis.

For older data you can use the eve-central API.

PS: Kondratiev waves in EVE? Discuss. Very Happy


Hehe .. I think even with "normalization" into EVE time we havent been around long enough to show those cycles.. 40-60 years right? Even if we made that into months I think it will be hard to discuss those. :)

EvilCheez
That's Retarded
FIGHT CLUB INC
Posted - 2010.08.29 09:47:00 - [18]
 

Quote:
To make better money in RL markets than through managed funds, you must be smarter than they are, and that takes some doing.


Buy a S&P spider - now your smarter than most fund managers.

Mme Pinkerton
The pink win
Posted - 2010.08.29 10:01:00 - [19]
 

Originally by: Caleb Ayrania
Hehe .. I think even with "normalization" into EVE time we havent been around long enough to show those cycles.. 40-60 years right? Even if we made that into months I think it will be hard to discuss those. :)

hmm... wouldn't look too much at the time frames.

If I were to go looking for Kontradief cycles in EVE, I would suspect events like the seeding of supercapital BPOs, the introduction of w-space, ... as potential initiators.

Some event/change that results in a flurry of investment & innovation and increases the rate of growth of economic activity/output (per capita) markedly until the market is saturated and the effect wears off.

Vaerah Vahrokha
Minmatar
Vahrokh Consulting
Posted - 2010.08.29 10:14:00 - [20]
 

Hello,

I wanted to thank the persons who supported me even in game. As a result of the feedback I am going to review and improve the existing posts and also those I was in the middle of making.



As for feedback in this thread: I don't understand some posts (in the literal sense) while I got some others which I am going to address.

First of all I understand this is quite inusual stuff expecially for a game. I believe in the value of "thinking different", this has served me well in the past decade of MMO gaming, results being sometimes still visible today in the form of videos or guides sites.

Therefore I won't stop before closed doors, conventions, "secrets" and whatever.

How do you think the "I take 10 minutes a week to make hundreds of millions" EvE traders are doing? Not by 0.01 ISKing for sure, not in 10 minutes.
They are probably following some more simplified and immediate model but still...
I have a Customer (i.e. I audited him) who would start a bond here on MD, "do nothing" for 3 days, then he would start churning out such impressive returns that I wouldn't believe to my eyes. Imagine consistent 20-30% returns of hundreds millions, made on items universally considered BAD.


Anyway, back to the topic:

Quote:

But isn't technical analysis based on the fact that it's largely used and thus working mostly because it exists ? i.e a support price is only reliable because enough people believe it is a support price and will start sending buy orders when price reach it, expecting price to bounce back up, and effectively making it go up.

Not saying it doesn't work (I certainly can't deny it after seeing someone get like 10k€/month on his own, with 90%+ of profitable trades, by using only technical analysis) or that it's voodoo () but I doubt it can seriously be applied to Eve (at least because of the pain of exporting the data to some analysis-friendly



No, technical analysis (TA) starts from the basis of studying price action by itself and eventually figuring out recurring patterns.
It's a study about mass human psychology, how the thousands act and react to market conditions, what are their customs, their fears, their greed.
I don't recall of anyone having done TA on EvE like this, therefore I cannot have conditioned anyone. I am fairly sure almost no one of the guys buying and selling in EvE has even a vague idea about being looked after by me.
Still, like humans, seen as large numbers, they will prefer buying and selling at 3,000 ISK and not at 2,974. They will prefer buying stuff that is known to yield good profits (see the guidance systems, robotics and whatsnot bubbles?) despite many of them WILL be burned the day those crash (this is the literal sense of the heads and shoulder pattern).

Likewise, when someone makes a well made market manipulation, people will flock at it like flies to a light. And they will be burned. And the graph WILL show the ensuing price breakout.
Basically TA is not a dark vodoo, it's just looking at what happens to price when people do something potent and noticeable in the market and eventually take profits by knowing about it.

It does not help that in the recent years an huge wagon of scammers has sniffed the opportunities about exploiting fresh wannabe traders and keep selling them pure garbage for high prices. Blame the scammers, not TA in itself for it.
Most often they sell magic indicators to follow like a monkey, this is how ruin arrives fast.
The only indicator required is the best out there, it sits between our ears. Gotta use it though and be willing to learn and practice for years, this is why so few do it.


Vaerah Vahrokha
Minmatar
Vahrokh Consulting
Posted - 2010.08.29 10:19:00 - [21]
 

Edited by: Vaerah Vahrokha on 29/08/2010 10:26:21
Quote:

hmm... wouldn't look too much at the time frames.

If I were to go looking for Kontradief cycles in EVE, I would suspect events like the seeding of supercapital BPOs, the introduction of w-space, ... as potential initiators.



I will show a very pragmatic and relatively short term approach. There are highly successful RL traders who are ignorant like donkeys, the concepts are not so hard. It's demand and supply flows, that's it. That's what's needed to make profits.

Sure saying it's like this is not exactly what the scammers would like to hear. They have to justify their expensive and overly intricate magic black boxes after all.

Business Classy
Business Class Investments
Posted - 2010.08.29 14:08:00 - [22]
 

Good luck VV!


Heh, you're making me want to study more economics Smile

Scott McClellan
Forum Posters Anonymous
Posted - 2010.08.29 14:34:00 - [23]
 

Originally by: EvilCheez
Quote:
To make better money in RL markets than through managed funds, you must be smarter than they are, and that takes some doing.


Buy a S&P spider - now your smarter than most fund managers.


Already did Cool

But the real world markets are significantly different than the EVE markets in that they can almost always be expected to increase over the long term. Often any benefit you would get from having a managed fund (if any) is wiped out by the fact that they have much higher maintenance fees.

EVE markets are subject to patches and adjustments, belt respawn rate, insurance changes, and I think at least in tech 1, where there is a huge supply and ready manufacturers (and miners), we're going to see continued deflation in basic ship and module prices. Also, we don't have a true in-game stock exchange, the best we can do is commodity trading and while the price changes due to speculation can be certainly significant, the fact that people often need the good in question and may be able to produce it themselves places a natural price ceiling on it given enough time.

Marshiro
Posted - 2010.08.29 14:47:00 - [24]
 

I don't think patterns do not exist in the eve market, however patterns get destroyed when too much isk start exploiting them. If someone with knows see an item will rise then buy it now, and relist for the "true" price, then it means the price reflects all information inside the item. If there were shorts this would be true too in the inverse, though it now takes a stockpile holder to crash the price.

Now, the eve market isn't "that well developed" and even jita gets cleared out of reasonable buy/sell on some lesser items so there is space, but it is not infinite.

Quote:
I don't recall of anyone having done TA on EvE like this

Well 'everyone' else does? How do you think the speculators and manipulators make their isk? Pattern analysis.

Caleb Ayrania
Gallente
TarNec
Posted - 2010.08.29 14:54:00 - [25]
 

Originally by: Scott McClellan


But the real world markets are significantly different than the EVE markets in that they can almost always be expected to increase over the long term. Often any benefit you would get from having a managed fund (if any) is wiped out by the fact that they have much higher maintenance fees.




Wats dat? I Raff I Ruse?

"let there be iskies, and there was iskies?"

Vaerah Vahrokha
Minmatar
Vahrokh Consulting
Posted - 2010.08.29 17:23:00 - [26]
 

Edited by: Vaerah Vahrokha on 29/08/2010 17:36:38
Quote:

Good luck VV!


Heh, you're making me want to study more economics



I have learned everything I know because I started following MD 1.5 years ago, without MD's few true inquiring minds I would never know anything significant about finance or economy.
Since then, I am trying to "give back" some, as a form of gratitude.


Quote:
EVE markets are subject to patches and adjustments, belt respawn rate, insurance changes, and I think at least in tech 1, where there is a huge supply and ready manufacturers (and miners), we're going to see continued deflation in basic ship and module prices


In RL we have fears, wars, tornados, technical innovation, resources depleting or being found...
Events are reflected and discounted by price. It's one of the great things of TA. It studies the price (re)action, not the causes.
You earn (or lose) money by opening a position in some RL market because you believe said market is showing i.e. a large dip you recognize as "playable". Whether it's caused by a patch, by an oil leak, by an earthquake or by a large 0.0 war it's not relevant.


Quote:

I don't think patterns do not exist in the eve market, however patterns get destroyed when too much isk start exploiting them. If someone with knows see an item will rise then buy it now, and relist for the "true" price, then it means the price reflects all information inside the item. If there were shorts this would be true too in the inverse, though it now takes a stockpile holder to crash the price.

Now, the eve market isn't "that well developed" and even jita gets cleared out of reasonable buy/sell on some lesser items so there is space, but it is not infinite.



I trade (among the others) the S&P futures, where every single day, multiple times a day, there is someone clearing up. Once I have some time I'll even post an example of it (done in game).
Also, not being able to short sell does not mean one cannot sell. There are limitations, yes, like in every "buy and hold" market out there.
BTW notice the effect of having a large stock to dump, take the buy orders out and then relist is as close to short selling you can get (in the effects). This (and not going short) is what some large institutions do in RL. They can afford to make the market that way, like a manipulator does in EvE, while small investors need to short: they cannot make the market.

Edit: for reference about what happens "behind the scenes" you may go and check the webinars held by Sam Seiden at

Linkage

Expecially enlightening are the ones called: "Breakout Trading In Forex, A Low Risk High Reward Strategy" (used by me in RL ATM and that will be exactly in the game example I'll post later) and "Forex Swing Trading With Supply and Demand Analysis".

Julius Rigel
Sub-warp Racing Venture
Posted - 2010.08.29 19:26:00 - [27]
 

Nice one, VV! I guess most of the MD crowd have several years of economics studies under their belts, but having only the basics myself I found this very informative and educational! Very Happy

Vaerah Vahrokha
Minmatar
Vahrokh Consulting
Posted - 2010.08.29 19:31:00 - [28]
 

Edited by: Vaerah Vahrokha on 02/09/2010 05:40:42
A little exercise for the readers while I prepare the next article.

Given the patterns above, what do you think to do about Coolant, next, considering the trend is this:


Picture Linkage


Removed image that was already linked as a URL - Adida


Would you buy or sell? Why?
Do you see or know where it's going to stabilize at?

As you can see, price patterns can have repercussions. Look at the TOTALLY RL alike volume peak around 5 Aug. What do you think the guys who bought at middle of August are going to do? Isn't being ignorant about markets going to hurt them some?

Vaerah Vahrokha
Minmatar
Vahrokh Consulting
Posted - 2010.08.29 21:28:00 - [29]
 

Edited by: Vaerah Vahrokha on 02/09/2010 05:43:41
>> IMPORTANT PREMISE: NO ARTICLE OF MINE IS INTENDED PROMOTING RL RISKY FINANCIAL SPECULATION. DO NOT ATTEMPT IT IF YOU DON'T KNOW WTF YOU ARE DOING. Neither in game nor in RL. <<

Even regarding EvE players, this is content suited for traders who have the shoulders and the guts to sustain and deliver on these moves.

------------------------------------------------------------



In this article we'll see how to perform what could be called "short term speculation".

In EvE we cannot (for now) exploit short term variations by using equity leverage, therefore an investment of a certain size is required to achieve similar effects.
In any case, the effect will take some days to apply, unlike in RL where you could do this in about 30 minutes-1 hour (on 5 minutes time frame, requires to be VERY good).

A word of caution: getting proficient at this kind of operation is not something quick, a lot of factors concur at making the setup work out flawlessy, including how the various "peaks and valleys" look like.
They have to look "healthy" and "well structured" in order to perform as expected.

For those willing to further investigate in the mechanics in RL:

Sam Seiden Webinars: Linkage. This is but one of MANY similar tutorials around.
My own RL article with pictures and vastly more in depth coverage than on this forum: Linkage

The article is in my mother tongue, the picture has English annotations. For a brutal translation with Google: English translation Linkage


Back to the topic.

What happens when someone dumps stuff? A dip in prices. What happens when several guys or a very big guy keep dumping stuff? Prices go down steeper.

The guy(s) are acting as supply and flooding demand. Part of this demand are traders though, so they will notice the more convenient prices and will start buying the stuff and eventually to bring it over another station to arbitrage on it.

By studying those kinds of dips it's possible to:

- attempt to predict when it's time to buy cheap stock

- attempt to predict when it's time to resell it / dump it as it's going to be less convenient to keep it.


Since we were analyzing Gallente Starbase Charters, let's examine them further.

Look at the graph posted in the previous article

Picture linkage

Removed image that was already linked as a URL - Adida

There's a blue "V" or "check" shaped pattern to the right.

This is the one we are after: it's called break out, because the price abruptly breaks above (or below like in the example) the average.

The event may be caused in RL by i.e. a large hedge fund dumping securities or in EvE by a player dumping stock. It does not matter.

Vaerah Vahrokha
Minmatar
Vahrokh Consulting
Posted - 2010.08.29 21:33:00 - [30]
 

Edited by: Vaerah Vahrokha on 02/09/2010 05:44:22
Before checking how it pans out in EvE, let's see what we are after:


Picture linkage

Removed image that was already linked as a URL - Adida


It's possible to see price before it drops. At first (step 1) there will be a short descent but some opportunistic buyers won't look at the greater level and will buy some of that stuff. It's seen as "a good deal!".
Others will slip in some buy order at that lowered price because the spread is better than before (step 2).

But then the supply keeps coming and at a certain point it overhelms demand. With no one willing to risk buying at steeply falling prices (it's called "scare money" in RL) the price goes in free fall till the supplier is done (step 3). The volume peak shows how much stuff is being dumped.
Of course if you also have stuff to dump, doing it during step 3 would be foolish at best. It'd be the classic "buy high, sell low" ruin scenario.

After some uncertainty, some guys start buying some of the crashed item (step 4). It's even possible for the original manipulator to be one of them: dump some stock and buy much more at cheap price back.
With enough purchasing, the prices will rise again, up to where it was at step 2. This in RL trading is where you want to enter a short position (step 5), in fact you had the time to examine the pattern and see if it was a real deal or a "fake".
What happens next is unknown, if there will be more buyers, the price will rise again and eventually start oscillating, else the trend will dip below the peak at step 3 and a new price descending trend will start to form till the next support.
Support is the next "psychological target price", that is where people historically feel like the security / item value is "alright" and will buy it enough to stop further drop.


Pages: [1] 2 3 4 5 6 7 8 9 ... : last (11)

This thread is older than 90 days and has been locked due to inactivity.


 


The new forums are live

Please adjust your bookmarks to https://forums.eveonline.com

These forums are archived and read-only