| Pages: [1] :: one page |
| Author |
Thread Statistics | Show CCP posts - 0 post(s) |
Black Mack
   |
Posted - 2009.04.04 04:26:00 -
[1]
I've noticed an annoying and inevitable rule of trading: competition will reduce profits. A formerly lucrative item will eventually become pointless given enough undercutting and outbidding, especially when the lemming effect kicks in. It's like the second law of thermodynamics: without the addition of outside energy, all systems will fall into chaos.
And yet, there are still plenty of items to make good isk on. Market manipulation can artificially improve an item's profitability, but this is a fairly rare occurance. So my question is, how does a profit margin spontaneously come about? And once an item's been rendered un-tradeable, what will it take to make it viable again?
|
Kalorned
Minmatar
Psychedelic Llamas
|
Posted - 2009.04.04 04:42:00 -
[2]
 Quote:
I've noticed an annoying and inevitable rule of trading: competition will reduce profits.
You don't say
Quote:
how does a profit margin spontaneously come about? And once an item's been rendered un-tradeable, what will it take to make it viable again?
First person on the market decides a profit. Competition enters and competes it downwards.
CCP generally controls viable / non-viable items.
|
Akita T
Caldari Navy Volunteer Task Force
|
Posted - 2009.04.04 05:12:00 -
[3]
Originally by: Black Mack
So my question is, how does a profit margin spontaneously come about? And once an item's been rendered un-tradeable, what will it take to make it viable again?
The answer to both these questions is simple : inertia.
It takes a while for people to notice an item is profitable, then more and more come in, killing the profitability, which makes more and more abandon the market, which turns the item profitable again later on.
And thus the cycle of prices is complete.
_
The problem with EVE || Fit a ship || Get some ISK |
Clair Bear
Perkone
|
Posted - 2009.04.04 05:57:00 -
[4]
Price crashing is a tactic useful for accomplishing a long term strategy.
Let's say I wish to accumulate a large position of some good. The very and I mean * VERY * first thing I do is narrow the ask <-> bid range to < 2% as quickly as possible. I move the buys to the sells as fast as lemmings dare to follow, and keep them there for weeks. After volume is pretty much "all me" I can allow the margins to increase again.
This is a very standard trading technique. As a pleasant bonus it causes tears on the forums.
|
Clyneva
|
Posted - 2009.04.04 06:44:00 -
[5]
Originally by: Clair Bear
Price crashing is a tactic useful for accomplishing a long term strategy.
Let's say I wish to accumulate a large position of some good. The very and I mean * VERY * first thing I do is narrow the ask <-> bid range to < 2% as quickly as possible. I move the buys to the sells as fast as lemmings dare to follow, and keep them there for weeks. After volume is pretty much "all me" I can allow the margins to increase again.
I don't really understand why this would work. What's to stop people from flooding to the item the minute it becomes profitable again? The brief time you get the market to yourself doesn't seem to justify the huge opportunity cost you paid for trading at next to nothing margins for weeks.
|
Akita T
Caldari Navy Volunteer Task Force
|
Posted - 2009.04.04 07:16:00 -
[6]
Originally by: Clyneva
I don't really understand why this would work. What's to stop people from flooding to the item the minute it becomes profitable again? The brief time you get the market to yourself doesn't seem to justify the huge opportunity cost you paid for trading at next to nothing margins for weeks.
Example...
There's 10 traders, 20 manufacturers and countless buyers for some item, and the item trades at a 10% margin.
The traders quietly do the dance of 0.01 ISK on both buy and sell orders, and the manufacturers do an even split between putting up sell orders themselves and selling to the traders.
Now suddendly, you come along. Quietly, you accumulate some units of that item.
You start closing the gap between sell and buy orders, stockpiling more and more of that item as average price goes lower and lower.
Some traders start deciding the item no longer deserves their attention and try to liquidate stockpiles or stop updating the orders until everything gets sold.
Some manufacturers decide that it's no longer worth their time and effort to put their own sell orders up, and most of them end up selling to buy orders, orders which are mostly yours.
Prices of sell orders start going down even more, most traders are nearly out of stock, you now have a pretty decent and cheap stockpile, and most manufacturers decided to stop manufacturing that product.
At this point, you simply buy out the remaining lowball sell orders, set a higher buy order price, and reinstate the original 10% gap but 10% over the previous average, with you controlling most of the current supply, and the trader volume in that specific item drastically reduced.
And now, most of your sales are at nearly 20% profit, and your sales are most of the sales of that item.
Traders start to see the opportunity and start overbidding you on buy orders.
Manufacturers restart manufacture and try to underbid you on sell orders.
When enough people have reappeared that it becomes bothersome to update orders, and average prices have nearly returned to the start of your cycle, you DUMP MOST OF YOUR STOCK on the buy orders and withdraw from the market for a while.
At the end, you are left with a small stockpile of goods similar to that you had at the start, loads more ISK in the wallet and a situation nearly identical to that at the start of the cycle. After a short waiting period, you can restart the cycle all over again.
_
The problem with EVE || Fit a ship || Get some ISK |
Isaac Swift
|
Posted - 2009.04.04 07:43:00 -
[7]
Akita, thanks for giving such a good example of how to utilize market crashes. Best description I've seen on MD... actually, it's the only detailed description I've seen on MD. I appreciate it 
|
Chiralos
Epitoth Guard
|
Posted - 2009.04.04 11:36:00 -
[8]
Originally by: Black Mack
Edited by: Black Mack on 04/04/2009 04:44:30
Edited by: Black Mack on 04/04/2009 04:43:33
I've noticed an annoying and inevitable rule of trading: competition will reduce the overall profitability of an item over time. A formerly lucrative item will eventually become pointless given enough undercutting and outbidding, especially when the lemming effect kicks in.
Isn't this pretty much the definition of market capitalism ? The money goes where the profit is ?
If you're a trader and you're not constantly looking to take risks and move your money in search of the greatest profit, why should the rest of the system (eg miners, manufacturers, consumers) tolerate you marking up prices ? A middleman who is not providing a useful service is a parasite.
Amarr Victor. |
Caleb Ayrania
Gallente
TarNec
|
Posted - 2009.04.04 12:10:00 -
[9]
There is actual advantages to a higher population of traders. The markets become more stable and less volatile, thus making long term placements a better option.
Also the benefits on short term and daytrading will become visible when producers stop over production and when traders balance their stockpiles better.
There are a lot of items and raw materials that are in overstock atm, and with more traders and higher competition this should gradually change..
- Money is Love -
Sometimes it just gets bend the wrong ways.
Feed your Brain:
Innovation Thread |
Esharan
|
Posted - 2009.04.04 16:21:00 -
[10]
Originally by: Clair Bear
Price crashing is a tactic useful for accomplishing a long term strategy.
Let's say I wish to accumulate a large position of some good. The very and I mean * VERY * first thing I do is narrow the ask <-> bid range to < 2% as quickly as possible. I move the buys to the sells as fast as lemmings dare to follow, and keep them there for weeks. After volume is pretty much "all me" I can allow the margins to increase again.
This is a very standard trading technique. As a pleasant bonus it causes tears on the forums.
This.
|
Clair Bear
Perkone
|
Posted - 2009.04.05 04:39:00 -
[11]
Originally by: Clyneva
I don't really understand why this would work. What's to stop people from flooding to the item the minute it becomes profitable again?
You'd be surprised how long an item can remain "undiscovered." The mere fact that people keep "discovering" profitable items years into eve's existence is testimony to this strategy.
Quote:
The brief time you get the market to yourself doesn't seem to justify the huge opportunity cost you paid for trading at next to nothing margins for weeks.
Not at all. The mistake you're making is assuming all investment capital goes to crashing the market. Nothing could be further from the truth -- profits on just about anything can be crashed with change you find in your ship's sofa. If the average buy/sell is about 1000 items I trade with 10-50. You can move tens of billions worth of PLEXes several % with just a single item!
|
Kazzac Elentria
|
Posted - 2009.04.05 05:20:00 -
[12]
Originally by: Akita T
<insert stuff>
Give giving away all the secrets and eventually there'll be no place for us dinosaurs. |
Akita T
Caldari Navy Volunteer Task Force
|
Posted - 2009.04.05 08:03:00 -
[13]
Aww come on, that was like "first grade of trade school" kiddie stuff 
Not only is it risky, but it commits a large part of your ISK reserves (well, depending on item) and can go bad in at least three big ways (manufacturers keep manufacturing and selling at old prices regardless of profitability, traders don't exit in spite of next to non-existing margins, or you are competing with somebody else trying to do the same thing).
_
The problem with EVE || Fit a ship || Get some ISK |
Xeoniya
|
Posted - 2009.04.05 17:21:00 -
[14]
Don't forget the cost of production isn't a stable cost, it varies with the cost of inputs (minerals, t1 components, rams, ect.) and with the cost of tools (mostly bpo/bpc cost). As the cost of production isn't stable neither is the % profit, add in different source locations and cost analysis recalc periods and you discover why the markets move around even in "efficient" (high buyer-seller areas like Jita) Markets.
If the production cost was stable, and were so the prices for the items in all regions then you would eventually kill the market, but as long as these are dynamic the markets will bounce around thus creating profit pockets that need to be rediscovered.
|
Ms Delerium
|
Posted - 2009.04.05 18:23:00 -
[15]
I have another theory, at least this works in Jita and other major hubs:
- At first, an item is not sold so 1st seller makes big profit using the price he wants
- Then others notice this and want to join the party
- No much time till 0.01isk wars and lemming mass produces the effect that OP is describing
- Then, one day, a random guy decides that he wants to sell 30% higher than people is doing. He opens his wallet and buy all the stuff on the market (low price) and sets a new monopoly.
This sometimes works, but others is a big source of OWNED situations
|
Black Mack
|
Posted - 2009.04.06 07:54:00 -
[16]
Originally by: Akita T
Aww come on, that was like "first grade of trade school" kiddie stuff
Not only is it risky, but it commits a large part of your ISK reserves (well, depending on item) and can go bad in at least three big ways (manufacturers keep manufacturing and selling at old prices regardless of profitability, traders don't exit in spite of next to non-existing margins, or you are competing with somebody else trying to do the same thing).
Akita, you want to clue us noobs in to some of the top-secret, mega-manipulations you pros are using? 
|
Ji Sama
|
Posted - 2009.04.06 08:54:00 -
[17]
Originally by: Black Mack
Originally by: Akita T
Aww come on, that was like "first grade of trade school" kiddie stuff
Not only is it risky, but it commits a large part of your ISK reserves (well, depending on item) and can go bad in at least three big ways (manufacturers keep manufacturing and selling at old prices regardless of profitability, traders don't exit in spite of next to non-existing margins, or you are competing with somebody else trying to do the same thing).
Akita, you want to clue us noobs in to some of the top-secret, mega-manipulations you pros are using?
ye sure she will... actually there is a guide with all the unknown secrets of market manipulation & control.... send me 1B isk and ill give you the pdf, its a killer guaranteed to make you rich.... trust me :p
This is a signature not related to EVE |
Ms Delerium
|
Posted - 2009.04.06 11:47:00 -
[18]
you guys need to be paranoid not only while mining afk during a war, but also when telling others how you are making isk on the market 
for example: "hey dude Im making big profits manufacturing/selling this item over this trade HUB, morons buy it twice its actual value" ---------> some hours later a couple of "new, unknown" traders flash in and your business is over.
|
Lady Charnoob
|
Posted - 2009.04.06 12:06:00 -
[19]
Yes but guys like Akita are talking about operations that require HUGE amount of money, i don't think all out there can crash jita markets...
|
Midas Man
Caldari
Dzark Innovations
|
Posted - 2009.04.06 12:21:00 -
[20]
Originally by: Ms Delerium
you guys need to be paranoid not only while mining afk during a war, but also when telling others how you are making isk on the market
for example: "hey dude Im making big profits manufacturing/selling this item over this trade HUB, morons buy it twice its actual value" ---------> some hours later a couple of "new, unknown" traders flash in and your business is over.
Or you use akita's advice above and get lots of "cheap" stock. Then use a random alt to post hey look at the 30% profits here, and cash in on all the traders that jump in
|
Clair Bear
Perkone
|
Posted - 2009.04.07 05:38:00 -
[21]
Originally by: Lady Charnoob
Yes but guys like Akita are talking about operations that require HUGE amount of money, i don't think all out there can crash jita markets...
Once again, USE THE LEMMINGS! Seriously, you don't need hundreds of B of your own funds at risk to swing prices around. Try it -- pick any reasonably traded item and put in a buy order. As soon as you get some, put em in as a sell. Undercut vigorously, but not often. Let 3-4 lemmings follow your every move. Before too long you're at zero profit in that item with nearly no cash of your own at risk.
And all this time the lemmings think they're teaching you a lesson, undercutting your 10 item order with a 1000 item order of their own. It's freaking awesome.
|
Dzil
Caldari
Elamous Industries
|
Posted - 2009.04.07 15:49:00 -
[22]
Originally by: Ms Delerium
you guys need to be paranoid not only while mining afk during a war, but also when telling others how you are making isk on the market
for example: "hey dude Im making big profits manufacturing/selling this item over this trade HUB, morons buy it twice its actual value" ---------> some hours later a couple of "new, unknown" traders flash in and your business is over.
Unless of course, you lie about which item you're making profits on.
It's a game that makes chess look simple, where the rules aren't fair and you don't even know how many people are playing. The whole bump the market by 10% trick sounds nice on paper, but there's also the risk that someone else has a crapton of stock sitting in Jita too, moreso than you have wallet to keep buying. And suddenly they are a hundred million isk richer, and you have a couple billion isk worth of some random module/skillbook that will take months to liquidate if you want to break even. Or, you hang on to the stock like the old maid, hoping some other poor sap tries the same thing so you can dump the sucker card unto them ;)
|
Dzil
Caldari
Elamous Industries
|
Posted - 2009.04.07 15:59:00 -
[23]
Originally by: Black Mack
Edited by: Black Mack on 04/04/2009 04:44:30
Edited by: Black Mack on 04/04/2009 04:43:33
So my question is, how does a profit margin spontaneously come about?
My own take on the problem is that, once an item has been abandoned by the majority of traders, the dynamics of supply and demand will be reversed. With less people reselling items, the profit margins will gradually increase back to where they formerly were. Best thing to do is just rotate between items, like a farmer rotates crops. The occasional market manipulation will do the trick too, though
You pretty much have it. Pretty much, one of 4 things will happen to increase the profits.
Traders and manufacturers will move out of that item, seeing the profitability is below what they can and should make elsewhere.
A wealthy trader will take the gambit and soak supply off the market, to artificially create a higher demand for the item. The flip of this is a trader exiting the market and dumping their whole stockpile, crashing the price downward.
Outside, in game conditions will change, creating new demand or eliminating supply of the item. For example, a major T2 manufacturer might get wardecced and cut back production, or a big alliance might start stockpiling in preparation for a big engagement.
Outside, metagame conditions may fundamentally alter the viability of the item, for example the changes to the scanning system and introduction of wormholes.
|
| |
|
| Pages: [1] :: one page |
| First page | Previous page | Next page | Last page |