Greedy Goblin

Wednesday, May 16, 2012

You must station trade what you haul

Well, actually you don't if you are fine with hauling for buy orders. This case you lose serious profit. If you are the station trader of your own item, you skip the sales tax and the broker fee for the transaction between the two. However your profit won't just be haul_profit + station_trade_profit + fees, if we assume that the item is currently not "properly" station traded.

Let's talk about the generic X which cannot be mass-produced but created by many individual sellers. Its also not mass-bought by industrialists but individual consumers. Perfect example is an implant. Its equilibrium value is 75, meaning that if all the buyers and sellers would be gathered together in an open bidding auction, the bid would stop at 75.

The buy orders therefore must be below 75 since if they would be above, the buyer would be flooded by X that he can't sell. The sell prices must be above 75 or the seller is bought out and his order disappears. How far they are from 75 depends on the competition or the brain of the monopolist. I mean if you are the lone station trader and set up buy orders at 5, you probably won't get a single item as sellers will rather make their own sell order or haul it to other hub.

But what is really interesting is that the prices are usually not symmetrical. I mean they are not 65-85, rather 50-80. The reason is that sellers are usually more patient than buyers. The one who sells X is more likely sets up a sell order, than a wannabe consumer setting up a buy order.

To make it more strange, the average price, the one listed in the price history window is usually also not 75 but higher. The reason is the same: the consumers are more likely to buy an overpriced sell order than the sellers to sell to an underpriced buy order. You can sell X for 149 but you can't buy it for 1.

Why is it important for you? Because as a hauler if you don't station trade you are bound to sell to the underpriced buy orders. If you just set up a sell order but don't station trade, you'll end up undercut since the sell price of an "unproperly" station traded item is usually way above the equilibrium, so the 0.01 punks can keep up undercutting you for long and still be with profit, while your profit is limited by your buy price in the place you haul from. You can easily end up at a loss, buying for 80 since you see they sell for 110 but when the undercutting ends, your item sells for 78 and for this -2 you hauled, updated prices for days and kept your capital locked.

How to "properly" station trade an item? By setting up buy orders in a way to ensure that the average sell price is 75 and the buy-sell region is symmetrical. How to do it? The safe but slow way, that involves no guessing is to make 2% steps. So if the buy orders (several 0.01 things) are at 40 and the sells are at 100, then the step size shall be 2. You buy at 42 and sell your first haul at 98. The exception is if the buy order is already below your hauling pickup price. So if you buy the item for 50 somewhere, you shall set the buy price to 50. It would be stupid to haul if you can buy it locally for the same price, right?

After that every day you update your prices if undercut. Since the distance is 60 and you make 2x2 step every day, in two weeks you'd reach zero profit, which will not happen as the 0.01s will give up and the individual buyers-sellers will accept your actual price before it happens. For example at 60 buy 80 sell the individual sellers will accept your buy order, supplying you with items. Whenever you have enough items to sell, don't haul. As the sell price keep dropping, more and more 0.01 punks give it up and go away. After their stocks are liquidated, they are removed from the sell side, so the sell price go up a bit. Finally you reach something like 70 buy 80 sell.

If you are happy hauling for your own buy order price, do, if not, don't. Please note that if you are busy hauling, the price will decrease due to the increased local supply. Whenever your buy price is below your hauling margin, stop hauling, just station trade. Calculating hauling profit with your sell price is a mistake. Imagine that you can buy for 70 and sell for 80 saying "I made 10 by hauling", while you could buy for 70 on the same station, making the same profit without any movement.

Moron of the day: I went to bring some Electrolytes to my coolant producing planet. I warped to the customs office and switched planet mode to make adjustments on the planet. Soon I heard the shield warning sound. Switched off the planet mode, and just in that second I was in the pod. Warped away and started checking who was the idiot who shot me for mere 8M cargo and 2M fittings. His name was Ammatar Navy Admiral. Since my last visit to that planet I was busy increasing Minmatar standing, therefore decreased my Ammatar standing below -5. Also did not notice that my planet is not in Minmatar space. Anyway, I got a diplomacy book and after rank 2 I could go back to loot my wreck and manage the planet.

Still, I'm not the moron of the day. While my action was really dumb, I'm nowhere near these two idiots who shown up when I was creating new bookmarks in Jita in an empty shuttle:
EVE Business report: Wednesday morning 21.8B. (0 PLEX behind for second account, 0.9B spent on triage carrier alt)
Don't forget to join the goblinworks channel to discuss trading and industrial ideas and laugh on the morons of the day (50-80 people on peak hours).


Anonymous said...

You still pay sales tax when going straight to the (underpriced) buy orders.

Anonymous said...

Whenever I try station trading (usually some meta4 modules) I end up buying items much faster than I can manage to sell (and my BUY/SELL prices after 1-2 weeks of station trading some particular item almost always match what you just posted above).

I've tried trading items with high and low daily volumes and I usually avoid easily craftable items, but the result is always the same: I can't get any profit as my capital gets wasted on still increasing stockpile.

What am I doing wrong?

Gevlon said...

You simply have too big stockpile. You shall choose an "maximum stockpile size", let's say 10.

You set up buy order for 5 pieces. You start getting items that you put to sale while updating buy price. When the buy order is filled, you only set up a new one if you have less than 4 items for sale. Until at least 2 of the items don't sell you don't set up new order. When you are down to 3, you set up buy for another 5.

Anonymous said...

Gevlon said...
It would be stupid to haul if you can buy it locally for the same price, right?

Not always right. Due to max open orders per char, sometimes I insta-buy from a sell order, haul, sell via sell order. In this manner, the item only occupies one market order (the sell order in the destination system).

You can navigate around this using trade alts to get more active orders, but only three alts per acct, etc etc. Number of market orders is often the limiting constraint.

Monkeytroubles said...

There is also the option of moving part of your stockpile to another location where the buying is slower. This of course requires a number of station trading alts to orchestrate properly.

Anonymous said...

The meta 4 market is crashing (has crashed) after the latest patch (april 24th ). They removed meta 0 drops and it seems meta 4 items drop much more often now as replacement.

So yes, meta 4 market is a bad place to start station trading atm.

Kristopher said...

Ermmm ...

Rule #1 while missioning for rep:

Do not complete a faction kill mission. Look in eve-survival. If you have to kill faction or faction pets, refuse the mission. Pirate factions and "mercenaries" are OK to murder.

If you are under the 4 hour timer for refusing a previous mission, just ignore the agent, find a new agent, and let the faction kill mission expire.

Faction pets like Ammatar or Khanid Kingdom are particularly hard to repair, since you can't just do career agents or another SOE arc mission for them.