Greedy Goblin

Wednesday, March 19, 2014

0.01 one last time

Few things frustrates me more in EVE than the fact that 0.01-ing is still done by humans. Considering that trading is a competitive environment and updating orders by 0.01 ISK isn't inherently fun, it should have died out already.

I probably wrote more posts about this topic than anything else. I earned and keep earning more ISK than probably all the 0.01-ers combined, but this idiotic practice still exists. Now I try to explain its stupidity in the most basic terms as possible.

The main problem with 0.01-ing is that it's not even trading at all, since the practice does not allow the player to set prices. He automatically updates prices, without caring much about their value. He simply wants to be the lowest seller by 0.01 and updates again and again: this is farming, turning time into money, requiring no knowledge or skills, therefore its income is bound to converge to the other "money for time" activities like mining and missioning.

Let's disprove this dumb practice once and for all. You have an item for sale. You don't want to use it, its only utility is selling it for ISK. It doesn't matter how you got it, the item is equal to another, regardless you looted it, crafted it or bought it. It doesn't matter how much you paid for it in ISK or time, that's all sunk cost. All that matters is that you have it and now want to sell it. You can sell it instantly to a buy order or you can set up a sell order. Sell orders give you more ISK, but they decrease the chance of selling in a given time frame. The larger the difference is, the more time you have to wait before you sell. This time can be infinite if you set the price high enough. The exact time is defined by competition, the more fierce it is, the more people compete for the same sells.

It's obvious that decreasing your sell price gives you a faster sale, since you can sell infinitely fast if you decrease the price to the buy order price. Waiting has costs: your capital is locked down and updating orders take time that have opportunity cost. You don't want to wait too long.

The catch with the 0.01-ing is that it doesn't decrease the price at all. So if you updated your order, unless you are lucky and a buyer arrives before someone else does, you did nothing. It's like buying a lottery ticket: if you lost, you lost, game over. You are just like you were before, but you wasted time on updating. What guarantees that if you update with a significant amount, you get a sale, instead of just being 0.01-ed again? Absolutely nothing. The difference is that if you update with a significant amount, then in N updates you will decrease the price to the buy order, guaranteeing a sale. So you are guaranteed a sale in N steps, while the 0.01-er has no guarantee that he will ever sell anything. This is the catch with 0.01-ing: you can do it all year without selling anything at all, if you are unlucky enough.

Of course they claim with their infamous "you ruin the price for everyone" line that cutting prices is not profitable. Maybe it's not, but you have no choice if you want to sell. Remember, you want to sell the item as you don't need it and the cost you paid to get it is sunk! Selling at loss is better than not selling and sitting on a useless item.

"But if I sell at loss, how do I make profit?" - you might ask. The answer is accounting: after a while, check the income and cost of an item. If the profit is negative or too low, stop trading it. If it's high enough, keep trading. I do regularly lose on items and kick them out of my collection, replacing them with another. Therefore I always make profit. The only way I could stop making profit, if every item would become unprofitable, but such market equilibrium is impossible in EVE where only a few people trade right.

So the short version of good trading is: "sell it no matter what, if you sold it for profit, come back again", while the 0.01-ing can be summarized as "update and hope".



Look, another little snake got stomped on!
Can anyone tell what did this guy want?
I think the corp name is messed up for this guy. I mean losing the inty can be unluck. But losing pod in highsec is bad.
But the moron of the day is this Goon slave.
Hey, another Goon POCO taken!

16 comments:

Dave Rickey said...

Not quite that simple, as I'm sure you realize. Orders get filled in order, and money velocity (speed of return) has a value. Every minute that an order is open is a minute that capital can't be used for something else.

Now, I never played the .01 game, I was playing the arbitrage between regions and simply accepting that meant a lower capital turnover rate (but at higher margins). I'd look at the historical range for what I was selling or buying and set my orders at a rate I thought would lead to that order clearing by the next time I swung through.

However, a lot of people are arbitraging across *time*, they buy and sell without transporting much, if at all. They're playing on the fact that buyers don't want to wait for sellers, and vice versa (where I was playing on the fact that buyers and sellers wouldn't cross regions to find each other). In that position, every time you miss an opportunity to buy or sell because someone else was .01 lower, you've lost potential profit, an order that isn't the lowest or highest is just idle capital to no purpose. They're the ones that play the .01 game, because they have different incentives.

They tend to be hyper-specialists that are trying to dominate the trade at a particular second or third tier market center, or even in a single commodity at a first-tier.

--Dave

Gevlon said...

The best income/time/capital is mining. You only need a retriever (30M) capital and the ore is in fast.

Trading necessarily happens over zones or time, otherwise it has no added value.

Crow said...

I am guilty of 0.01 isking - however my situation is different.
I'm not a Trader I'm a manufacturer. That means I have to regularly buy huge amounts of low price/low margin materials (mostly minerals, Ice-Products and T1 salvage) on many of those the margins are so tight that heavy undercutting is simply no option. But the raw ammount of materiel needed lead to big savings from buy orders.
I dislike the 0.01 isk game but any alternatives I tried where simply unable to provide me with the neccessary ammounts I needed only Jita can provide that.
If it gets too idiotic I just buy directly but doing so all the time would seriously cut into the profits (Thanks "I mined it for free, lol!"-Idiots)

Arrendis said...

But wait, Gevlon! If only Waffe are 'true Goons' because they're the ones who don't worry about evaluations, then how are non-Waffe POCO losses counting as 'Goon POCOs'? Shouldn't they be 'Inner slave POCOs'?

Arrendis said...

As for the 0.01 argument - doesn't it make more sense to simply hold onto the items for later sale, rather then sell at a loss now? Liquid isk is depreciating isk (the nature of inflation is that any currency held as currency is constantly slowly depreciating in its buying power), so why convert back to liquid rather than riding out a temporary dip in prices?

Raphael said...

I agree that 0.01-isking is effectively 'update and hope', but that doesn't necessarily mean that it's always an irrational strategy.

As long as you're in a good-sized hub, you can find products where 'hopefully someone will buy/sell something before I'm out-bid' is a bet worth taking - buy orders on salvage/minerals being one example. Turnover on those is so high that you often only need to be the top order for a minute or two to successfully buy something.

Also, as a manufacturer I often find products where I don't need to try to chase away competitors - we can all comfortably sell our stock as fast as we're producing it. In those cases, I'll generally update orders by 0.01 isk to keep prices steady. (Although with these I don't sit there doing it every five minutes, and if someone else is doing that I'll switch to crashing the profit margins until he goes away.)

Anonymous said...

Why not just swap to simple order and sell to a buy order if you are going that low with your sales?

Saves taxes, which probably makes it more profitable than updating and selling it below your original cost price.

I just set orders, and leave them. Many people have not figured the market does not move much, and, if their order is not on top, they panic and lower the price.

Leave an order, see how much you have to update it by, even a week or so later. I rarely get orders time out, and everything sells at the price I wanted for it.

The only reason for wanting to sell fast, and now, is because you need the liquid isk.

Garner said...

I'm one of those -0.01 jita sellers. I manufacture some items (now starting to T2 and I'll avoid T3 by demand issues and small margin). There are situations that allow the use of that tactic, even seeming weird.
I'm software engineer. I made a program that pick up prices and calculate rentabilities and profit stimated in a week of 24/7 manufacturing. I started with Eve-Central, but XML is slower than TXT, so moved to eve-marketdata. That program also calculates the demand BY SELL ORDERS (not all the demand that is sell+buy as the data in the game shows) of a given item, with those TXT and the orderid of each one.
Given that data I do:
- choose the first items with sellratio > 1 (that means that the demand of jita is more than 1 slot manufacturing that item 24/7) in that db table that sorts by weekly profit.
- buy an already invented bpc from contracts (the program can even calculate the rentability given a bought bpc)
- buy directly (from sell orders) the minerals or materials that I need and I don't have.
- manufacture it (mostly ships, so it lates 1-3 days being sub-capital)
- move it and then play that 0.01 game knowing that soon or later will sell them as they have demand and that I won't get a loss bargain by that huge margin of profit. As mode of example, today the Vargur have +369% of profit (the program doesn't include the cost of a fuel block for a POS, so that profit is less if you invent it) and his demand would be enough to set 4 manufacturing slots 24/7 (with a TE of -4). Having into account the cost of the materials to manufacture it, you get 733M by each unit you manufacture.

As you can see, not all of us are traders :)

Niko Kotiniemi said...

Thoughts on the issue: we could use market order price relative to not only price, but time. This would need more careful thought but perhaps current order price for 2-4 weeks and fractions/multiples relative to that. This would discourage 3 month orders with 0.01 game and instead encourage multiple shorter orders with possibly higher quantities and quicker market fluctuation.

Additionally trading window could have automatic update (say once per 30-60min) within player set percentage range (e.g 0.1% or set idk range o'er order) of the order unit price.

The order price change should be higher to reflect this, to discourage multiple quick changes and encourage multiple orders with (sort of) fixed price but possibly higher quantities.

Smith said...

The .01 ISK trading style is a valid style for just the reasons that Gevlon states: it's trading for those who don't know any better or do not care. Nad as long as it goves them what they want...

But more importantly it's the way most trade-bots seem to be set up. It's quite oblivious at times who is a bot or not, but that is neither here not there in this discussion.

Tor said...

One of the reasons why 0.01ing is still a thing: http://mistressjita.blogspot.co.uk/2014/03/station-trading-guide-101.html

This is actually a new guide, too!

Anonymous said...

Eve is not a real economy. All the items are the same, there's no way to differentiate between you and competitors, as you would in the real world with value/style/functionality/etc/

The only tool you have is price, and once a person starts cutting it is a race to the bottom. The first to betray the cartel will win the most at first, but will lose in the longer term once he gets undercut by the second betrayer, and so on.

Tor said...

@Anon 12:24

Then the item becomes unprofitable, the traders move to greener pastures. The cycle continues. The winner is always the agressive trader, looking for the best deals. 0.01ers waste their time in ridiculously large cartels.

Anonymous said...

@Tor
The aggressive trader sells no quicker than a 0.01 isker. They still only sell when someone buys from the order.

Gevlon said...

But there are more buyers at lower prices. For the buy order prices, there are instant buyers.

Anonymous said...

I always try to sell not to the buyer, but to the competition, I undercut them and don't put too many items up at once. That way I get maybe 60% of my original profit but can do it again right away