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Chickai Hawk
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Posted - 2009.04.27 03:47:00 -
[1]
Hi there folks, I'm a bit new at the markets and having read most of the stickies, one question that hasn't really been covered is the ability to crash the market. At the moment, I'm looking at an item that will net me close to 90% profit.......if i can sell it.
Buying from Jita and re-selling lets me get a rather juicy profit but the problem is that the turn-over of this item is a little too slow in my re-sale market. I'm wondering if I should effectively crash the market and reduce my profit margin to say, 50% (very reasonable for this item )
My question is; Will crashing the market to 50% profit for me have a greater effect on the market as a whole? I understand that everything you do affects the market but I am curious that if i reduce the price of my sell order by so much, will it likely be snapped up be other traders or bring the average price down (thus everyone loses)?
The last thing i want to do is destroy the current market and thus rendering it impossible for me to maintain profits. Thinking of crashing the market just to get some turnover
Any help appreciated Cheers Chick
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Power Sauce
Kenzzoku
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Posted - 2009.04.27 04:11:00 -
[2]
Sounds more like competing in the market rather than crashing it.
If all you do is decrease price and there are potential buyers all you'll do is increase sales.
I have had people crash markets by placing 3 months worth of stock on the market. Which is the same volume of sales at a much lower profit.
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PublicRelations Kwint
Lothian Quay Industries
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Posted - 2009.04.27 04:30:00 -
[3]
This is one of those problems that has too many variables to ever have a definitive answer.
If you put the price too high, you will have virtually no volume, which seems to be your current issue. The % profit is amazing but the turnover is nonexistent.
If you drop the price you'll see more volume which is liable to offset the loss in per item profit. However, this requires more capital and time.
If you drop the price too much you may well create a miniature hub which is great for all of two seconds, after which you'll have competition and that opens up a whole new can of worms.
Personally, I would gradually lower until I hit what I felt was an acceptable margin. Assuming overhead -time and risk to ship stuff out there- was small, I'd probably but a lower bound at 30% profit. Below that point the increased volume is liable, at least in my mind, to be surpassed by a combination of decreasing per unit profit, increasing invested capital and the possibility drawing unwanted attention.
Purchasing and Shipping Moon Minerals |
Frenzei
Gallente Fortuna inc. Leather Rose Syndicate
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Posted - 2009.04.27 17:11:00 -
[4]
You have to trust your own number enough to leap off the edge and try. As said, there is no answer to all situations in the market, trust your numbers enough? Do the leap, don't trust the numbers? Don't leap, perhaps climb down instead.
Lone Wolf |
Bret Caliaro
Fortuna inc. Leather Rose Syndicate
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Posted - 2009.04.27 20:37:00 -
[5]
Originally by: Frenzei You have to trust your own number enough to leap off the edge and try. As said, there is no answer to all situations in the market, trust your numbers enough? Do the leap, don't trust the numbers? Don't leap, perhaps climb down instead.
I disagree with every single letter in this post, but yea do the maths, if u sell 10 items for 2mill profit u make more than selling 5 for 2.5. _________________________________________________ I'm a such a lazy Bast***, so I play smart not hard. |
Chickai Hawk
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Posted - 2009.04.28 03:46:00 -
[6]
Update; So I decided to gradually climb down the ladder with my mighty 2 items and hilarity ensued. What eventually happened was I sold my units (for about 75% profit, gotta be happy with that) but the other traders completely undercut each other and now the market is about 20% above what the buy orders are for. Prices went from 40m to 28mil in 1 day. Now I just need to wait for the market to recover
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Isaac Swift
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Posted - 2009.04.28 04:15:00 -
[7]
Looks like you just experienced the terrible pain of the lemming effect
There are two basic ways to approach this situation. Your first option is to continue trading the item at a 20% profit, which is still fairly substantial. Depending on the competition, your increased volume of sales may make it all worthwhile.
Your second option is a bit more risky, but can pay off substantially. If you are finding that the competition is getting a bit too fierce, you can crash the market further with your cheap stock from Jita. Slowly drop it down to something ludicrously low, like 2%, which covers your brokers and sales fees. Make sure that you have buy orders up as well, because if you do it right, traders will begin hemorrhaging the item in an attempt to make their money back. Make sure that this excess stock lands in your lap. After you've strangled the market for long enough, and all serious competitors have left the item alone, you can jack the prices back up to the original 90% profit that you enjoyed originally, with the added benefits of no competition and mountains of stock. Note that, depending on how long it take for more of this item to find it's way to the market, you may not be able to unload your stock before competitors return, and the market will often crash hard for a time after you've done this.
Regardless of what you do, try to remember what your competitors (and customers) will be thinking about your decisions. If you only do something half-way, it will often have little to no effect, other than hurting potential profits.
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Zerah Sinai
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Posted - 2009.04.28 04:21:00 -
[8]
Had this conversation with Swift the other day, very helpful guy!
I think that the speed in which others notice your price manipulation (up or down) in certain markets can be key as well. If they are slow, you can leave the price high for a while. If they are fast, you will have to be faster, or employ other means of trading.
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Chickai Hawk
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Posted - 2009.04.28 04:31:00 -
[9]
Edited by: Chickai Hawk on 28/04/2009 04:31:06 At the end of the day, I've come out on top here as I've sold my items for a substantial profit before the lemmings took over.
That said though, I think I might just begin doing what Swift said anyway, for ****zen giggles That way, once the competitors are gone, i can start enjoying some decent profits again. Even at 2-10% profit, I'll be turning enough to be worthwhile
Thanks Swift and everyone else for all your input!
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Ms Delerium
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Posted - 2009.05.10 23:27:00 -
[10]
making money out of lemmings is the most rewarding thing on trading
the other one is: crash the market and the other guy buys all ur stuff and u crash again
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Black Mack
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Posted - 2009.05.10 23:48:00 -
[11]
I've actually been wondering something about market manipulations: is it feasible to make money soley through manipulations? Instead of investing most of my isk in "standard" trading while running a few manipulations on the side, what if I invested all of my isk into running a constant string of manipulations? It'd be a risky style of trading, but potentially far more fun and profitable.
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Ender2006
APOCALYPSE LEGION
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Posted - 2009.05.11 04:28:00 -
[12]
oh its entirely feasible, even in major hubs. problem is you can also get burnt, very very badly :-P
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Shadarle
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Posted - 2009.05.11 06:03:00 -
[13]
Originally by: Chickai Hawk Update; So I decided to gradually climb down the ladder with my mighty 2 items and hilarity ensued. What eventually happened was I sold my units (for about 75% profit, gotta be happy with that) but the other traders completely undercut each other and now the market is about 20% above what the buy orders are for. Prices went from 40m to 28mil in 1 day. Now I just need to wait for the market to recover
A 20% margin on an item selling for 28 mil is pretty respectable. If there is any kind of decent volume I wouldn't expect to sell too many at 40m too often.
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Mme Pinkerton
Caldari
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Posted - 2009.05.11 06:31:00 -
[14]
Originally by: Chickai Hawk
My question is; Will crashing the market to 50% profit for me have a greater effect on the market as a whole? I understand that everything you do affects the market but I am curious that if i reduce the price of my sell order by so much, will it likely be snapped up be other traders or bring the average price down (thus everyone loses)?
ok, seems like you have a serious amount of market power (if you can maintain such a high price/crash prices), so essentially we are talking about the optimal price you as a monopolist should set (forget about the lemmings for now).
The solution to the monopolist's profit maximization problem is rather intuitive: as long as demand is inelastic to price rises you want to increase the price, as soon as it gets elastic you stop increasing (or in your case decrease the price until demand gets inelastic) - if you are not familiar with the concept of price elasticities see Wikipedia.
Now, we have a situation with several traders where each one has his fair share of market power and the price is already pretty high. Your statement (slow sales) very clearly indicates that prices have probably risen well above the "sweet spot" characterized above into the elastic region - so the sellers don't make maximal profit atm.
If you lower the price but stay within the elastic range, you would expect other sellers to lower their prices, too - the average price goes down and everyone will make more profit due to higher sales. If you lower your price to get into the inelastic region, other sellers will buy you out.
So far I haven't answered the question why we are in a sub-optimal state at first - one reason might be that (a) it is very hard to estimate elasticities in EVE (although you can get a general idea by thinking about the "Determinants" section in the Wikipedia article), so different traders might calculate with different elasticities, (b) price elasticity varies with time (almost certainly true, as we have weekly acquisition patterns - towards the weekend elasticities will decrease) and you are posting this at a time of high elasticity but average elasticity is lower or (c) the other traders haven't heard about profit maximization yet
(now, if you find a way to apply above statements directly to EVE - i.e. get reasonable estimates on price elasticities of demand - I have some spare cash which is waiting for investment )
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