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Shakuul
Caldari O RLY corp YTMND.
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Posted - 2007.09.12 21:12:00 -
[1]
Edited by: Shakuul on 12/09/2007 21:11:50 oops pressed enter too early, adding a real post, sec
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Shakuul
Caldari O RLY corp YTMND.
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Posted - 2007.09.12 21:18:00 -
[2]
Note: I looked at Jita too and there's still a small spread, like 2.97/3.18 instead of 2.8/3.4
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Shadarle
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Posted - 2007.09.12 21:47:00 -
[3]
Minerals are ALWAYS worth what you could sell them for right now. Thus their value changes but this is the only value that matters. What you payed means nothing, an average of buy/sell means nothing. Once you own minerals it doesn't matter what you payed... it now matters what you can get for them if you don't produce anything. Thus you must determine their value if you were to sell them all. Then you compare that to what you'd get if you produced with them. Whichever is higher is what you do, period.
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Sphynx Stormlord
Gallente Anqara Tech
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Posted - 2007.09.12 23:25:00 -
[4]
Minerals are not ALWAYS worth what you can sell them for. Sometimes they are worth what it would cost you to buy more.
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Shadarle
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Posted - 2007.09.13 02:37:00 -
[5]
Originally by: Sphynx Stormlord Minerals are not ALWAYS worth what you can sell them for. Sometimes they are worth what it would cost you to buy more.
Which is the same thing. You could buy more at the sell price. If there aren't any sell orders then you could sell yours for a lot more money... as much as it would cost you to get yours. The cost to sell minerals is the price to buy more quickly.
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Tommy TenKreds
Animal Mercantile Executive Animal.
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Posted - 2007.09.13 05:02:00 -
[6]
I always value all my stock at current Buy Order prices.
i.e. What would I get for everything if I had to liquidate it right now?
This is the only reliable method of valuing stock IMO, since it is only worth what someone else is prepared to pay you for it there and then.
Bandures > Tommy, you like a cowboy harry ) |
Shadarle
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Posted - 2007.09.13 06:38:00 -
[7]
Originally by: Tommy TenKreds I always value all my stock at current Buy Order prices.
i.e. What would I get for everything if I had to liquidate it right now?
This is the only reliable method of valuing stock IMO, since it is only worth what someone else is prepared to pay you for it there and then.
If you use this value to determine production costs then you're likely screwing your profits over royally.
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Galgorth
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Posted - 2007.09.13 06:48:00 -
[8]
From an accounting standpoint, Shadarle's definition is correct. Minerals are worth what you can sell them for. However, I would like to expand that definition for the more profit-inclined:
Minerals are worth what you WILL be able to sell them for.
For example, if you had bought up Trit before the coupling arrays nerf and sold it several days later when the price jumped 20%, you would have made a LOT of isk.
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Shadarle
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Posted - 2007.09.13 06:57:00 -
[9]
Originally by: Galgorth From an accounting standpoint, Shadarle's definition is correct. Minerals are worth what you can sell them for. However, I would like to expand that definition for the more profit-inclined:
Minerals are worth what you WILL be able to sell them for.
For example, if you had bought up Trit before the coupling arrays nerf and sold it several days later when the price jumped 20%, you would have made a LOT of isk.
Indeed... but you have no way of knowing for sure what will happen to prices tomorrow. You can guess, but you'll never be 100% accurate.
So the simplest form you can use is to account for them as if you were to sell them right now on the market. But if you see there is an upward trend in a mineral that shows no signs of stopping then id say its safe to bump the value a little bit to account for that.
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Nocturnal Avenger
The Ankou The Reckoning.
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Posted - 2007.09.13 11:53:00 -
[10]
Originally by: Shakuul Just wondering for my own purposes, if I have say 50mil trit in my hangar, how much is it actually worth.
Guesstimate price in an active market (bid price + ask price)/2 * 50M = approx. value
Precise value is whatever you fetch when you actually sell the stuff - just like IRL.
- Carebear Pirate - |
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SheriffFruitfly
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Posted - 2007.09.13 19:41:00 -
[11]
Originally by: Galgorth From an accounting standpoint, Shadarle's definition is correct. Minerals are worth what you can sell them for. However, I would like to expand that definition for the more profit-inclined:
Minerals are worth what you WILL be able to sell them for.
For example, if you had bought up Trit before the coupling arrays nerf and sold it several days later when the price jumped 20%, you would have made a LOT of isk.
For some purposes present value is what you want. For other purposes, future value is what you want. For yet other purposes, any of about a jillion other value-definitions are what you want.
(a) "value" is a matter of *definition*, not fact. (b) In different circumstances, some definitions are more salient that others.
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Shakuul
Caldari O RLY corp YTMND.
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Posted - 2007.09.13 23:36:00 -
[12]
I was looking for a quantitative model or something that would spit out a number between the highest buy order and the lowest sell order, with some explanation behind it.
Maybe it would help if you look at items with a bigger per unit spread, like improved implants, which have a 15mil mil spread in the citadel, and maybe a 10mil spread in jita. This is the same thing with trit, you just multiply by 30mil (so a .4 per unit spread becomes a 12mil spread for 90mil units). This matters a lot.
The only reason to value trit at immediate liquidation value (whatever the highest buy order is) is if: A) you have a small quantity (people wont bother buying unless you are in a hub) B) you literally have to sell it NOW (not like, an hour or a day from now)
These cases are fairly uncommon for most manufacturers, who will probably end up waiting a few days to a week to build their ships and clear their mineral inventory. Given a week to sell, you could easily sell 30mil trit at .1isk below the lowest order. Because of this, I'm more inclined to go with a value of (high bid + .8 * spread) per unit, or something like that. However I don't really know how to argue for .8 * spread instead of .7 or .9 .
Originally by: Galgorth From an accounting standpoint, Shadarle's definition is correct. Minerals are worth what you can sell them for. However, I would like to expand that definition for the more profit-inclined:
Minerals are worth what you WILL be able to sell them for.
For example, if you had bought up Trit before the coupling arrays nerf and sold it several days later when the price jumped 20%, you would have made a LOT of isk.
I think 20 or so years ago, out of the money stock options also counted as having zero value (at least on the books of the company who was giving them out) which was clearly false. Accounting definitions are really only good because they are consistent and provide a guesstimate of value to work off of. This is the same kind of thing im looking for here. The highest buy order is the accounting value, but how much should that be increased to get the actual value?
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Shadarle
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Posted - 2007.09.14 00:42:00 -
[13]
I do not understand what you are not getting here. The minerals are worth whatever you can get for them. That doesn't mean .01 isk below the lowest sell order. It doesn't mean the lowest price in the system or station. It means whatever you could ACTUALLY get if you wanted to sell it all. This obviously changes if you have 500 million trit compared to if you have 5 million. 5 million would sell FAST and you could price it much higher and still get it sold fairly fast. If you have 500 million trit then you need to price it lower to move it quickly.
There is no hard and fast rule you can use. Every item is different, a percentage won't even work. You have to know the market for that item to know what you could get.
You obviously are going to come up with whatever rule you want. But if you value your minerals for less that you could get for selling them (whatever that value is) then you miscalculate how much items you build cost you in minerals, thus you miscalculate the profit you make for producing them. Now if you aren't calculating that and simply want a liquidation number then highest buy order price is what you want.
I make absolutely boatloads of money doing this kind of stuff on the market. It's all about opportunity cost. There are millions of different things you could do on the market... the key is finding the ones that yield the highest actual ISK profit per day. Percentage profit means nothing, individual transaction profit means nothing... it all comes down to how much you make each day. Maximizing that is the goal. I'm telling you what I do... which is rare, as I give away very little of what I actually do on the market. Generally what I give away is tips about things I no longer am involved with. If you don't agree that is fine and totally your prerogative... you need to account for things the way you are comfortable with.
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Matthew
Caldari BloodStar Technologies
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Posted - 2007.09.14 09:12:00 -
[14]
Originally by: Shadarle Indeed... but you have no way of knowing for sure what will happen to prices tomorrow. You can guess, but you'll never be 100% accurate.
So the simplest form you can use is to account for them as if you were to sell them right now on the market. But if you see there is an upward trend in a mineral that shows no signs of stopping then id say its safe to bump the value a little bit to account for that.
The problem with this approach is that what you can sell them for right now may not even be what you can sell it for even just 5 minutes from now.
While there is certainly a lot of money to be made through arbitrage trading and short-term speculation, where such an approach is useful, it is much less useful for a manufacturer.
The manufacturing process is not instant. This means that you are forced to make predictions on future price, even if they are only short-term predictions.
You're answering the Refiners Question of "can I sell X minerals now for more than I can sell Y items for now". This is fundamentally different to the Manufacturers Question of "can I sell X minerals now for more than I could sell Y items for at some point in the future when they've finished building".
Originally by: Shadarle Indeed... but you have no way of knowing for sure what will happen to prices tomorrow. You can guess, but you'll never be 100% accurate.
This is true. But choosing not to do a forecast when answering the Manufacturer's Question does not eliminate this. By doing no forecast and basing the answer on current prices, you are making the implicit forecast that the prices are not going to change. This is just as likely to be wrong as any other forecast. ------- There is no magic Wand of Fixing, and it is not powered by forum whines. |
Fabricati Diem
Burleigh and Strong
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Posted - 2007.09.14 20:11:00 -
[15]
Originally by: Matthew
Originally by: Shadarle Indeed... but you have no way of knowing for sure what will happen to prices tomorrow. You can guess, but you'll never be 100% accurate.
This is true. But choosing not to do a forecast when answering the Manufacturer's Question does not eliminate this. By doing no forecast and basing the answer on current prices, you are making the implicit forecast that the prices are not going to change. This is just as likely to be wrong as any other forecast.
I don't think the 'best buy order price' approach makes any attempt to forecast, implicitly or otherwise. It merely attempts to work with what is known: the immediate market data.
The value of an item is what someone will pay for it. Numbers can be crunched to maximize this, but it really comes down to your judgment and current market conditions.
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Matthew
Caldari BloodStar Technologies
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Posted - 2007.09.14 23:11:00 -
[16]
Edited by: Matthew on 14/09/2007 23:13:00
Originally by: Fabricati Diem
Originally by: Matthew
Originally by: Shadarle Indeed... but you have no way of knowing for sure what will happen to prices tomorrow. You can guess, but you'll never be 100% accurate.
This is true. But choosing not to do a forecast when answering the Manufacturer's Question does not eliminate this. By doing no forecast and basing the answer on current prices, you are making the implicit forecast that the prices are not going to change. This is just as likely to be wrong as any other forecast.
I don't think the 'best buy order price' approach makes any attempt to forecast, implicitly or otherwise. It merely attempts to work with what is known: the immediate market data.
You're right in that it doesn't attempt to make any formal forecast. But if you use the current 'best buy order price' to determine whether it's worth building something, you are, by definition, assuming that the 'best buy order price' will still be valid at the point in time when you've finished the manufacturing process. That assumption is just as much a forecast as a massive spreadsheet with trend lines, donchian channels, normal distribution limits etc on it. It's just quicker to do.
How valid that that implicit forecast is will depend on the market conditions and the amount of time that it takes to manufacture the item. For a 24-hour job in a relatively stable market, the implicit forecast is likely to be very good - not much will have changed in that time. The longer the build time, and the more rapidly changing the market, the worse this implicit forecast will become.
This effect will be most pronounced in things like capital building where build times are very significant, or things with long supply chains (capital/T2) where you really need to be able to track price movements through the chain.
Originally by: Fabricati Diem The value of an item is what someone will pay for it. Numbers can be crunched to maximize this, but it really comes down to your judgment and current market conditions.
I'm not disputing that. What I am pointing out is that what someone will pay for it will vary over time, and the very nature of the manufacturing process means that you have to take the decision whether to manufacture at a point in time before you are able to sell the item. Because of this, every cost-benefit assessment of a manufacturer will involve a forecast of some sort, whether he realises it or not.
EDIT: I do acknowledge that in the right circumstances, the implicit forecast can be a very useful and valid tool. I use it myself sometimes. But in order to know when it is valid, you first need to recognise that it exists, and what limits come with it. ------- There is no magic Wand of Fixing, and it is not powered by forum whines. |
Shadarle
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Posted - 2007.09.15 02:57:00 -
[17]
Matthew, you are arguing a theoretical point. In theory of course you cannot be 100% certain you will get the same value today as you would have when the items were done being manufactured. You of course can not 100% accurate predict future values either. There is no way to 100% accurate predict anything other than an instant sale to buy orders. This doesn't mean you can't do a nearly accurate job of predicting it.
I can VERY accurately predict what the price will be tomorrow, the next day and even a week away I can be fairly accurate in my predictions. This is obviously the price you use when valuing the minerals. This is the entire thing I've been trying to say the whole time... yet people are nitpicking and trying to argue with me when I think they really agree.
You price minerals at what you would get if you decided to sell them instead of manufacturing with them.
This price is not always the lowest sell order on the market, it is not the always the highest buy order. It is the actual price you could get for those minerals. This is a number which requires knowledge of the market so you can make accurate predictions on the price you'll get for all the minerals. It is not a willy nilly number you pull out of this air or pick because it matches a current value you see somewhere.
If you honestly have no idea how to determine this number then you are not a serious trader and should either use the highest buy order price or the lowest sell order price as your price, depending on just how little knowledge of the market you have. In either case you're not accurately representing your assets and will thus not be making as much money as you should be... since you'll likely be selling the manufactured items for less than you otherwise could as well.
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Ricdic
Caldari Corporate Research And Production Pty Ltd Zzz
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Posted - 2007.09.15 07:52:00 -
[18]
Buy 5b worth of trit for 3 isk and sell it in 2 weeks for 3.45 isk.
That's my daily prediction
1.66b units of trit @ 3 = 5b 1.66b units of trit @ 3.45 = 5.75b
Profit = 750m / 2 weeks
ROI = 16%
Not bad if my prediction reaches fruition And yes, I have isks riding on it doing so as well but with higher numbers as I bought back at 2.45 just before the coupling array nerf.
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Shadarle
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Posted - 2007.09.15 08:07:00 -
[19]
Originally by: Ricdic Buy 5b worth of trit for 3 isk and sell it in 2 weeks for 3.45 isk.
That's my daily prediction
1.66b units of trit @ 3 = 5b 1.66b units of trit @ 3.45 = 5.75b
Profit = 750m / 2 weeks
ROI = 16%
Not bad if my prediction reaches fruition And yes, I have isks riding on it doing so as well but with higher numbers as I bought back at 2.45 just before the coupling array nerf.
Heh. I don't have patience to hold stock of anything. Good luck tho... the market does seem to be heading in that direction.
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Nummb
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Posted - 2007.09.16 18:13:00 -
[20]
Question then:
By your logic of buying trit in hoping it will rise, if everyone did that, or say 5,000 people did that wouldn't that artifically raise the price of trit and then the first person to cash out wins while everyone else starts unloading their massive stockpiles of trit will lose out?
I.E. housing market in U.S. went up really fast 5 years ago, the people who bought houses 20 years ago sold for huge profit and are now sitting pretty, the people who bought these houses are now finding out that the house is really not worth what they paid. So they are losing money, some even losing the house while those people who got on early made lots of cash and are good to go. Can this same thing happen with the EVE market?
I don't want to get podded by every trader for blowing the whistle on this, but shouldn't everyone go around and buy up every single sell order in their region that is under 2.85isk? This will result in you spending millions or billions on trit and create some sort of logistical challenge, but then in two to three weeks collect it all and haul to major hub for mass sell off and profit?
BTW, if this is major taboo to put this on forums reply fast and I will edit :)
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Benvie
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Posted - 2007.09.16 18:18:00 -
[21]
Your logic only accounts for traders buying and selling trit. A large portion of the trit that is purchased is consumed for production and a large portion of the trit that is sold comes from miners. You can't ignore those. The reason the trit is going up is because its price was artificially lowered due to NPC goods being refined. This is no longer possible at current prices. Therefore the prices won't necessarily come back down, although traders buying up trit in anticipation of rising prices (aka hoarding) will drive the prices up faster than they would have on their own.
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Shadarle
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Posted - 2007.09.16 18:55:00 -
[22]
Originally by: Nummb Question then:
By your logic of buying trit in hoping it will rise, if everyone did that, or say 5,000 people did that wouldn't that artifically raise the price of trit and then the first person to cash out wins while everyone else starts unloading their massive stockpiles of trit will lose out?
I.E. housing market in U.S. went up really fast 5 years ago, the people who bought houses 20 years ago sold for huge profit and are now sitting pretty, the people who bought these houses are now finding out that the house is really not worth what they paid. So they are losing money, some even losing the house while those people who got on early made lots of cash and are good to go. Can this same thing happen with the EVE market?
I don't want to get podded by every trader for blowing the whistle on this, but shouldn't everyone go around and buy up every single sell order in their region that is under 2.85isk? This will result in you spending millions or billions on trit and create some sort of logistical challenge, but then in two to three weeks collect it all and haul to major hub for mass sell off and profit?
BTW, if this is major taboo to put this on forums reply fast and I will edit :)
Of course this is true to some degree. All markets based at least partially on speculation are boosted by the expectation that prices will continue to rise and are hurt when there are rumors of a crash. Of course the first person to cash out at the max point wins the most... but who knows what that point will be. Everyone who cashes out before that point didn't max out. There is no single person who decides to cash out suddenly and causes an entire crash. There are tens of thousands of people in the trit market, so you'll never notice a single person selling out or buying up. It will only be noticeable when more people cash out rather than buy in.
Ricdic is very smart though, telling everyone that a great way to make a bunch of money will be to buy up trit and resell it when it hits 3.6. It's smart because it only causes the price of trit to rise faster than it otherwise would as more people buy it up. It's a good idea. I personally don't invest long term in any single item... I trade my items away as fast as possible so I could care less if an item is going up or down in value. I just like an item to be changing in price... and Ricdic is helping to make that happen so I love it
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Nummb
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Posted - 2007.09.16 20:09:00 -
[23]
I understand both points, but aren't there about 15 other threads in the first two pages that argue that the producers who don't take into account the value of the minerals before they actually start production could potentially be losing money by making items instead of just selling the minerals? Of course if everyone bought into the theory of just selling minerals then who is buying them and for what reason? Somebody, somewhere is going to produce items, cause the market will state there is a need for ships and modules.
And about miners, I love them :) I personally have made more money buying, transporting and selling minerals than I ever did when I was actually hanging out in a belt dropping ore into a can. I guess it is our saving grace as traders that miners are either lazy, or into instant gratification instead of shopping their wares about the market in an effort to maximize their gains.
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Shadarle
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Posted - 2007.09.16 20:40:00 -
[24]
Originally by: Nummb I understand both points, but aren't there about 15 other threads in the first two pages that argue that the producers who don't take into account the value of the minerals before they actually start production could potentially be losing money by making items instead of just selling the minerals? Of course if everyone bought into the theory of just selling minerals then who is buying them and for what reason? Somebody, somewhere is going to produce items, cause the market will state there is a need for ships and modules.
You're not understanding the basic point being made in those other threads it seems.
You're supposed to value your minerals out and compare that to the value of the item you'd make with them. If you'd make more selling the minerals then you sell them. If everyone did this then there would actually be no reason to do this, if that makes any sense. Because all items would actually be worth manufacturing as people wouldn't sell them below mineral prices. But in actuality most people won't actually do this. Most people will continue being utter fools and selling produced items for less than they could have sold those minerals for. This means anyone with a bit of sense can make extra money by not producing and being the person who does sell the minerals. If more people do this, the sell price of minerals will come down and then it will become profitable to manufacture with the minerals again. Plus there will be less items produced so the price of the items will go up, also increasing the profitability of producing.
By being smart you make more money than those who are stupid if you simply value your minerals correctly. And the more stupid people there are the more money you will make, as it will cause an even greater rift between sell price of minerals and price of the item you would have produced. Stupidity is the greatest source of money in the market... figure out where the highest concentration of stupid players are and make a killing.
ps. You could substitute lazy for stupid anywhere you'd like and it would be similarly true.
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Matthew
Caldari BloodStar Technologies
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Posted - 2007.09.17 12:14:00 -
[25]
Originally by: Shadarle Matthew, you are arguing a theoretical point. In theory of course you cannot be 100% certain you will get the same value today as you would have when the items were done being manufactured. You of course can not 100% accurate predict future values either. There is no way to 100% accurate predict anything other than an instant sale to buy orders. This doesn't mean you can't do a nearly accurate job of predicting it.
I can VERY accurately predict what the price will be tomorrow, the next day and even a week away I can be fairly accurate in my predictions. This is obviously the price you use when valuing the minerals. This is the entire thing I've been trying to say the whole time... yet people are nitpicking and trying to argue with me when I think they really agree.
Yes, I do think we're actually largely in agreement in terms of what we're thinking of, I'm just not sure we're expressing it in the way the other is expecting.
I'm not arguing that you can't predict, or predict to a good degree of accuracy. What I'm saying is that when you do predict (even implicitly), you need to be clear that that's what you're doing, and have some idea of the likely accuracy of your predictions (or at least be aware of what could happen to make it all go horribly wrong).
I've seen things go horribly wrong when one person is taking that as read, and the other person doen't pick it up because it's not explicitly stated, so admittedly I might be a bit obsessive about being ultra-specific, especially when there are time-delays involved. ------- There is no magic Wand of Fixing, and it is not powered by forum whines. |
Block Ukx
KDM Corp Firmus Ixion
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Posted - 2007.09.17 20:01:00 -
[26]
I valued my mineral stock at my acquisition price (including fees and taxes). You need this number to determine profits/losses.
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Alz Shado
Ever Flow FREGE Alliance
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Posted - 2007.09.17 21:25:00 -
[27]
Sell your overpriced Trit and buy some underpriced isogen. Once the isogen prices go back up, sell it and buy whatever's underpriced at the time.
Rinse, repeat.
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Shadarle
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Posted - 2007.09.17 21:33:00 -
[28]
Originally by: Alz Shado Sell your overpriced Trit and buy some underpriced isogen. Once the isogen prices go back up, sell it and buy whatever's underpriced at the time.
Rinse, repeat.
Lolz
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Matthew
Caldari BloodStar Technologies
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Posted - 2007.09.17 22:25:00 -
[29]
Originally by: Block Ukx I valued my mineral stock at my acquisition price (including fees and taxes). You need this number to determine profits/losses.
Of course, you need to make sure you attribute that element of profit/loss to the right activity.
mineral sell price - mineral acquisition price = profit from mineral trading
item sell price - mineral sell price = profit from manufacturing
Assuming that you buy and sell in the same place. If you haul it somewhere else to sell, then part of that profit is really generated from your hauling activity rather than your trading activity. ------- There is no magic Wand of Fixing, and it is not powered by forum whines. |
Shadarle
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Posted - 2007.09.18 00:22:00 -
[30]
Originally by: Matthew
Originally by: Block Ukx I valued my mineral stock at my acquisition price (including fees and taxes). You need this number to determine profits/losses.
Of course, you need to make sure you attribute that element of profit/loss to the right activity.
mineral sell price - mineral acquisition price = profit from mineral trading
item sell price - mineral sell price = profit from manufacturing
Assuming that you buy and sell in the same place. If you haul it somewhere else to sell, then part of that profit is really generated from your hauling activity rather than your trading activity.
Exactly. Too many people think that
item sell price - mineral acquisition price = profit from manufacturing and it's simply not true.
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