Greedy Goblin

Tuesday, March 25, 2014

Why is there still money in trading?

Most traders keep their secrets. I've published my traded item list openly, along with transportation methods, names of trader alts, everything. Yet I'm still making enough ISK to support the pretty expensive GRR project. Others are starting trading now and getting great results, despite the game is very mature.

Why is this? I mean why didn't we reach the equilibrium where further trading profits can't be achieved? Why are there white areas? Why can new people build hubs or make fortunes against year-long veterans?

The solution is in the comment section of the EN24 repost of my article on 0.01. Ignore the trolls and focus on those who wrote something serious. Each and every one of them were defending the dumbest possible trading methond: 0.01-ing. I mean they could argue for flat Earth, they wouldn't be dumber.

This is the antithesis of education. These people aren't uneducated, they openly refuse to be educated and keep believing in nonsense, in face of obvious evidence (like the retards who claim that buyers are inflexible, despite the existence of buy orders). You can yell your "secrets" into the wind and nothing happens. They will ignore them and keep believing in whatever nonsense they used to believe. Hell, they are ready to believe in new nonsense, if enough people claim the same.

The profit is right under everyone's nose, but socials actively refuse to pick it up. If you are ready to use your head, you can find it literally everywhere. If you ask naively "why did you leave it there guys?" the chorus of socials answer "because it's not there", despite you just shown it to them.

The biggest barrier before rational people is lack of contempt for socials. You naturally assume that people are like you and if billions would be laying around, others would pick it up. Or that no one can possibly fell for a cheap trick. Being logical isn't enough. To be successful, anti-sociality or at least a-sociality is needed. You need to embrace the thought "the people around me are just apes, unable to think" and only then you can accept that you can make billions trading the same items that everyone else trades, since they don't do it right. Or even more blatantly: you can make money by offering an "ISK doubling service" in Jita local.

Dumb Goons, slaves and renters of the day: Renter hauls in Jita with expensive pod.
Null slave PvP-ing in cheap frig ... with expensive pod.
Missioning renter, see top damage dealer.
Why does someone rents in null if he missions in high (see rat on kill)?
Obligatory horrifit interceptor with pod.


Esteban said...

You do realise that the majority of the commenters look at your name first, decide that they hate you, and then try to cobble together some kind of argument just to oppose you. Usually failing: Dunning-Kruger effect at work, among other things.

The feedback has nothing to do with your economic theory, which is sound and simple: playtime has value, sustainability is better than 'burst profit' and logistics beat tactics.

Most long term successful traders have figured this out.

Tabletop Teacher said...

People tend to have this idea that everything as a fixed price. That's why they like to talk about supply vs. demand. They've seen that graph, and assume everything is priced at where they intersect. They don't understand other pricing tactics, or that either variable of supply and demand can shift over time.

What you've done so far is simply give them a running strategy for success. They don't want to believe you, because it doesn't match their own experience (i.e. They've made profit from 0.01 before, so hindsight bias tells them they're right, keep doing it.)

If you want to reach these people, I'd suggest going to the supply/demand diagram, giving some eve related example items. Show them what you see in the eve market, with shifting variables or pricing tactics. Appeal to their intellect, rather than calling them slackers and morons.

If you're serious about educating people, I suggest you look into something called the affective filter. It may open your eyes a little to why your anti-social tactics don't reach the majority of people.

Arrendis said...

Actually, Gevlon, (and keep in mind, I'm not a trader) I haven't really seen you much explain your methodology beyond '0.01 is bad. Buy crap and shotgun it to see what you make money at, then keep doing that.'

You've said that lowering prices by 0.01 isk is akin to buying a lottery ticket, because it's all just a matter of timing - be the guy w/the lowest price at the moment someone wants to buy the item, and I can see how that's a perfectly accurate statement. But you've also said it's better to lower your prices by a greater amount in order to capture more sales - and that's got me curious: how is that not the very same 'lottery' process, given the existence of the trade-bots that will still just 0.01 isk your new, lower price? How are you not just trying to be the lowest price at the moment someone goes to buy the item?

Gevlon said...

@Arrendis: because buyers have three options:
- buy the lowest current item
- set up a buy order above the current highest buy order
- give the finger and get a cheaper substitute

The closer the buy and sell prices to each other, the more likely they'll pick the first option and buy. So the number of buyers increase with price decrease.

If there are enough buyers, they keep buying out the 0.01-ers. When they are out of stock, I sell too.

Bots have very little stock (usually just 1 item/type) since stocks are at the risk of banning. The botter uses minimal capital and remove extra ISK from the bot to protect it from bans.

Human 0.01-ers on the other hand stop trading the item, since it no longer worth their time (getting 1M profit for one update a day is great (about 1M/5 secs = 720M/hour), camping all day for it is not.

Lucas Kell said...

To be honest, from personal experience with both methods, you sell no more items deep undercutting than you do 0.01ing when the margins are reasonable anyway. No buyer is sitting around going "right, I need a drake... omigosh that one is 6% above the buy orders!". The people that do that are traders, and they are not our primary market.

Our primary market simply says "I need a drake... bought". As long as the price isn't inflated to hugely unreasonable, they just buy stuff. So the aim is to be the lowest price on the pile at the time they decide to buy.

Now I'm not saying anyone should only 0.01, but they shouldn't dismiss it completely either. Both deep and shallow undercuts are perfectly valid tactics, you just have to decide which works for you and when. Mastering how to make decisions like that is how you become a good trader.

Arrendis said...

The closer the buy and sell prices to each other, the more likely they'll pick the first option and buy. So the number of buyers increase with price decrease.

In part, doesn't that depend on what you're selling, and who your target market is, though?

I mean, sure, when I'm buying manufacturing components - or anything in volume, really - I'm buying on buy orders, regardless of what the current sell order prices are. If you're selling things like scripts/ammunition/drones/modules, though - the things that people buy when they need them, because they need them to fit out a ship right now - those buyers are no more or less likely to put in a 3-week buy order, regardless of price. They need X now, so they're buying whatever the lowest priced X is, no?

Anonymous said...

The thing is.

a)If I am a person who has the option to buy item X from Station A, or fly a few jumps to save Y ISK at Station B, is the saving between A and B what I consider sufficient to move there and back?

b) Because, luckily enough, not everyone likes trading. Just like "Why is there still insane profits in manufacturing" (And there are..who do you think is dumping 500+ of a T2 module onto buy orders? And before anyone goes on about Run the numbers, then see if making 5-10% at best, less your broker and market fees is worth the effort in Jita. On an item where you are making over 50% to start with)

c) Finally, because I 0.01 sometimes....because I can. Because it makes people make forum threads, because it makes you make blog posts calling me names. Because these people then make assumptions about the validity of my paternity, the sort of job that I do, the sort of time that I spend in Eve. I must be a no-lifer who is sitting there waiting just for them to update, not someone who suddenly remembers they have a tab open a few hours later, or just leaves stuff on the market til I can be bothered to update it, because I know prices dont move too much.

Anonymous said...

I really like reading your posts Gevlon, some are quite inspiring and I'm really supportive to your GRR project, but since your post about 0.01-ing, all my items in dodixie market crashed hard in profit.
The current situation is the same as before, people are 0.01-ing, but profit are down to one figure percent now because there was such an afflux of "trader" trying that method.

So, as Lucas Kell said, and with my basic understanding of offer/demand:
"you sell no more items deep undercutting than you do 0.01ing when the margins are reasonable anyway"
I couldn't agree more with that. I'm trading in low volume/high margin items, and doing a massive undercutting instead of a -0.01 to an existing order would not change a thing from the client side, he will buy the 1st item available because he need it (as long as it's not totally overpriced@+500%). And he may be the sole buyer that day.

So why should I undercut by more than -0.01 in that situation? Considering the low trade volume, you can't say that something like: "i prefer selling 3 items per day at 10% profit than selling 1 item every 3 days at 30% profit" because there's no way you can get that 3 sells in a day.

Gevlon said...

I prefer selling 1 item at 10% profit over not selling anything at all. Low profits make 0.01-ers mad and go away.

Anonymous said...

@Anonymous 10:56
That is exactly my experience with trading low volume/high price/margin items.
The volume doesn't change at all wether you sell it with for 10% or (depending on the item) up to 300% profit.
And it is uninteresting to dominate that markets with 10% profit, because you have to put too much work into it. So if someone likes to do big undercuts, I usually just let them have that item for a few weeks and then come back, after they are gone.
Trading those items allows making reasonable profit for extremely low time investement. But if you want to make "big" money, Gevlons practices are much better, just that you have to trade other items and invest a lot more time.

Anonymous said...

What I like is how items trade for less than what it take to manufacture an item, that to me shows me how clueless some of these people are.

Louis Robichaud said...

The reason why people aren't agreeing with you is that you haven't clearly articulated your case. It's not a failure of people being dumb, it's you not being clear.

So, let's take an example. There is a small hub where four traders (A, B, C and D) are selling a t2 mod (say, damage control II) for 750 K. The cost of this item is 500 K, and about 40 a week are sold. (yes, this is a modest example). Each trader will make about 2.5 million on this item alone. They are doing the 0.01 thing and on average each gets 1/4 of the orders.

You come in as well. At first, you are also doing the 0.01 thing and gain 1/5 of the orders, or 2 millions a week. However, you aren't satisfied, and start aggressively lowering the prices. At 650 K, trader D drops out, he's only interested in high margin items. The other traders are still in the market though, so you are now getting 1/4 of the orders, making 1.5 million a week.

You decide to undercut again, dropping to 550 K. Trader C drops out - his costs are higher (lower skills etc) and he isn't making money anymore. Congrats, 50% of your rivals are gone! You are now getting about 13 orders a week, making about 660 K a week...

You keep going, going down to 525K, barely making any profit. You only now have one rival, and sell 20 orders a week, making a grand total of 500 K a week.

Then what?

Even if you decide to go down to 500 K per item, making no profit and driving out all other traders... then what? As you as you rise the prices again, some of these rival traders will return.

Gevlon said...

@LR: 500K a week for one update a day is better profit than 2M a week for sitting front of the computer 0.01-ing.

If you don't sit, you are never the lowest seller, so you sell nothing.

Eaten by a Grue said...

The reason there is still money in trading is that trading isn't very fun to many people, and because this is a game, well, people just do not do it. This is not real life, where you need to work to live, and money is almost infinitely useful, and so you have much fiercer competition for market niches. This is a game, and people only care so much about play money. Markets are going to stay permanently inefficient, and you will have perpetual ability to exploit them.

Mike said...

One thing I think you're missing Gevlon is that different ways of trading suit different people's circumstances. I have only started trading, so I don't have much ISK to invest yet. This means that high-volume, low margin, low price items work best for me. Because of this, .01-ing works where your method would not.

In addition, I am at my computer most of the day as I do my work on it. I can leave EVE open in the background and look at it every 10-20 minutes. It only takes me a moment to update my orders, so the time isn't that much as well.

Once I get some more ISK (I have already earned a few hundred million doing this) I could move to your method. But I think .01-ing can definitely work in certain circumstances, and this is something you fail to consider.

nightgerbil said...

Hey look I'll be clear I'm a buyer not a trader. I want a commarant to go roaming low sec. I want the cheaper price. Jita too much? I'll go fly 6 systems and pick it up for 250k less. then fly the hull to jita and around nearby systems to pick up stuff as I dont have much money and I keep losing it on pvp. I fly to gevlons systems to buy his stuff as its cheaper and I'm limited by Isk not time (gevlon I'm a moron aren't I? sorry :( )

Gevlons point is its better to sell ten items(ship+fittings) to tools like me for 10k isk profit each then to sell me a dessy for 7.999k isk profit a tank module for 11k isk and not to sell anything else at all due to their being undercutters.

Gevlon makes his money by massive amount of low profit bulk sales. Driving the prices to the noise floor eliminates the minor competitors for his markets and when he strikes major competition he simply leaves the market. He has established several niches that he owns and he makes money hand over fist. I keep trying (and failing) to copy him.

Louis Robichaud said...

Gevlon, I usually adjust my orders twice a day. That is enough I find. Not every market is infested with people (bots?) who update their orders every five minutes!

In a situation where you are competing with a few traders for low volume high margins, and no one is a rabid order updater, preserving the margins with very small price decreases makes sense no?

Anonymous said...

There are other effects in play as well. First is the order limit. If you've got the capital to be trading in ships, then you can't be fussing around in T1 drones; you'll run out of orders. That means the market requires a large number of traders all all levels.

Second is the UI inefficiency. IRL, this would all be handled by bots. IG, the inefficiency of human updating allows for lots of room for entry.

Third is effort specialization. People come to the game to do different things. Goblin has his project, and has little time/patience/tolerance for 0.01-ing. But that means there's a profit possibility for someone who does. Similarly, PvPers want to spend time PvPing, not flying around sourcing gear. That means a profit margin for traders moving gear form trade hubs to where the PvPers need it.

Unknown said...

I dislike 0.01-ing things. It annoyes me. It always reminds me of the auction from the musical Oklahoma where the antagonist keeps upping his bid against the protagonist by "two bits". The equivalent of 0.01 trading.

Over the weekend I did several billion in trading. Quite nice a nice haul, but something I noticed, which I think is designed to drive prices down, were people trading 1 item (when sales volumes are in the thousands) at 0.01 lower. The unthinking trader would be foolish to take this bait, but I wonder how many 0.01ers did take the bait.

Later in the day I would check my orders, see people had 0.01-ed me and a couple did the cutting you advocate. After tweaking a couple of orders to keep it within my sales tolerance I called it day. Two days later, all my items sold, despite not playing the 0.01 game. Had I played it all weekend long, I would have lost more ISK than I gained.

But some people don't get Captialism (oh, and to the anonymous from yesterday: Morlocks vs Eloi has zip to do with Capitalism).

Anonymous said...

I basically agree but most traders get so upset if you don't .01.

I would argue that it depends on your frequency. If you are programming a bot, you would definitely .01 it. If you have a job like receptionist, desk clerk, guard, where you can check the market for hours a day, then .01 looks pretty good. If you check the order a couple of times a week, you are absolutely correct. I.e. how aggressively you position between the .01 price and the Gevlon price is determined by how often you are checking the order.

Premier said...

People don't seem to get that bots won't 0.01 any price. They'd be ridiculously easy to game if that was the case and you'd have people forcing bots to sell at cost by putting really low sell orders that the bots would then try to 'beat'. The bots will have a lower boundary on what they're willing t sell at set and it'll be set pretty high.

I go with a ten step reduction towards breaking even on my goods starting at the next highest sell order. I usually sell in step two or three, it's very, very rare that I've had to go the whole ten steps and end up not making any profit.

It lets me sell quicker, which means more free capital to reinvest and make me more money. 0.01 is just a waste of time, other people or bots will do it better than you, don't play that game.