Tuesday 7 January 2014

Optimized Trading vs Trading Your Own Way

Sugar, over at Lowsec Lifestyle has a thought provoking article about Losing Money, mostly due to not optimizing things. That got me thinking about a number of points I've been wanting to write about for a long time and gave me an idea (finally!) how to tie them all into one post.

I agree that not optimizing everything isn't necessarily a bad thing. I'm also a firm believer that as a trader doing things differently than most is far better than following the herd and bleating the "undercut by 0.01 ISK to maximize profits" mantra like a good, unimaginative little sheep.

Just for starters, doing things differently makes me less predictable and therefore more difficult for the competition to counter. I don't just mindlessly ship stuff off to wherever some spreadsheet says has the best sell price at the moment. It's often better to send them somewhere else. Just about anywhere else in fact. Somewhere with reasonable sales volumes and a smaller but still nice profit margin. I usually wind up with higher overall profits in the end than I would have made shipping for the highest sell price and winding up fighting over rapidly declining profits with a herd of spreadsheet using no-lifers and bots who all shipped to exactly the same place for exactly the same reasons.

More importantly every minute I don't spend poring over spreadsheets, studying data, grinding station standings and trying to do everything in what the herd blindly accepts as the most perfectly optimal (and therefore the only proper) way to squeeze every single possible 0.01 ISK out of every transaction, is another minute I can spend actually working the market..

Pretty much everything Sugar mentioned in her post are things I do too. Not all of them all the time, but some of them all the time (not worrying about or grinding station standings for one) and all of them at least some of the time.

I often list things, (mostly very commonly used, relatively cheap items like T1/T2 mods and ammo) at or near cost simply to attract players to the station where they then might buy other more expensive items from me that are quite profitable.

When breaking into a new inventory line (items you haven't worked before) prices are often inflated. One of those overly obsessive no-lifers or bots has been buying them ALL out at usual or somewhat more than usual prices and jacked the sell price way up (usually at least 100% higher and often 200-300% or even more).

In that case the best thing to do IMO is to buy one at or near the inflated buy price he's used to crowd everyone else out. Sometimes I get one quick and sometimes it takes a while but once I do get one I can post it for far less than his sell price and still make a very nice profit. If he undercuts that I can go quite a bit lower without losing money and if I have to I'll go right down to cost to break his control. I'll even go lower than cost if I'm sure the reset buy price is going to go down significantly too though I do have to be careful about that. I have to be quite certain he's not manipulating me into selling under cost (I've manipulated others into doing that on occasion myself).

If he doesn't undercut me and someone else buys mine, that's great, I'll just keep buying more in low volume and selling them for nice profits until he finally does react (he almost certainly will eventually).

If he buys me out, even better. I made a nice profit already so I can buy another even if costs a bit more than the last one and post it for a little more too. Keep buying low volume, raising the buy price and lowering the sell price which ultimately forces him to either pay too much for stock in large volumes or let me buy some too. If he keeps on trying to crowd me out by buying it all in spite of rising buy prices he risks buying way too much stock at inflated prices and running into a cash shortage that forces him to either bow out of that market or take big losses dumping stock for a lot less than he paid for it just to get some liquid cash back to play with.

Sometimes having orders delist, or cancelling a bunch of orders and not replacing them for even just a few days can be very useful too. Quite often that results in other traders resetting prices resulting in items that haven't been very profitable in a long time suddenly becoming very profitable. If prices were depressed for a while and you'd been stocking up while prices were down a price reset like that can make you a bundle

Sales performance in regions or stations that haven't been performing very well can usually be improved (sometimes greatly improved) simply by bringing in a good selection of commonly used ship hulls, mods and implants, and selling them at fair prices for the buyer.

Don't just follow the herd! Try doing things differently, as long as it works for you, you like doing it and you aren't hemorrhaging cash, do it your way!

11 comments:

  1. Hi,

    This looks to me as one of the best piece of advice for an Eve trader: "As long as it works for you, you like doing it and you aren't hemorrhaging cash, do it your way!"
    I'm not sure what Eve players and, hence, you mean by spreadsheets. I mean I don't know if you (or Eve players) make a distinction between spreadsheets in the Google sense and spreadsheets obtained by coding. For example, I do make that distinction. All trading activities are, in my opinion, based on taking advantage of information, which can come in various forms: friends, experience, spreadsheets, coding etc.

    "More importantly every minute I don't spend poring over spreadsheets, studying data, grinding station standings and trying to do everything in what the herd blindly accepts as the most perfectly optimal (and therefore the only proper) way to squeeze every single possible 0.01 ISK out of every transaction, is another minute I can spend actually working the market.."

    First, I can't help myself making a somewhat malicious comment. The concept of optimal doesn't have degrees of comparison. It is a black or white notion. Second, I agree that over analyzing data is lost time. This fact connects with the "spreadsheets" vs "coding" remark I made earlier.

    Spreadsheets are, once again - in my opinion, not the way to go for a trader (if he/she is faced with a choice). Eve is a game, and as you mentioned it instead of over analyzing market data one could spend the little time, he/she feels worthy to invest in his/her Eve trading adventure, in the actual trading process.

    On the other hand, coding is on a totally different level. The actual trading process consists of a series of in-game actions one chooses to perform while attempting to increase his/her imaginary wealth. All the actions are ultimately the result of some "Yes/No" questions. Coding allows one to construct a few per item parameters which, when "looked" at, give a "Yes/No" answer in the blink of an Eye. This leaves enough time for a player to get the "big picture" of his trading activity.

    Anyway, I'm not suggesting or implying that one has to code in order to trade. My point is that coding can really help a player, where spreadsheets only seem to help but they aren't really. However, in the end, Eve being a sandbox game means that anyone can/could/should find his own way in Eve, and in particular in Eve trading.

    Cheers,

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    1. Ah but if doing it in a non "optimal" way results in greater profits or the same profits for less effort, the so called "optimal" way really isn't optimal after all.

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  2. I'm not exactly against using various tools to help monitor your trading and assist with the decision making process. I use jEveAssets for that purpose myself. Spreadsheets I do not use.

    I do understand the value of coding your own tools. I'm an old C programmer from way back and have written my own tools for other games before but not for Eve (I mostly wrote and used in game tools which would be cheating in Eve).

    Many Eve traders seem to get carried away with the details and can't as the old saying goes see the forest for the trees.

    What I am against is the herd opinion that you must use spreadsheets if you want to be any good at trading in Eve. That's simply not true. You can be extremely successful without using any spreadsheets or other tools at all.

    I'm against depending on spreadsheets and such to make all the decisions for you. Like in the example I gave about herd think types all shipping the same items to the same place at the same time because that's what their spreadsheets told them to do. Then they wind up fighting each other, driving the price down quickly and can't figure out why the perfect, optimal strategy they all agree is best isn't performing as well as projected.

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  3. I use spreadsheets in my Regional Hauling business (buying from sell orders in Jita to put up sell orders in Dodixise / Hek / Amarr). I use the spreadsheets to make sure i only buy when the price differential is at least 20%.

    I also use spreadsheets in my manufacturing business to make sure it is cheaper to manufacture rather than buy at Jita (my items are then sold in Jita / Dodixie / Hek / Amarr / Rens).

    Now, i suspect Station Trading does not need spreadsheets and i also suspect buying from buy orders in the deeper regions to haul to a hub to sell may not need spreadsheets either.

    For me, part of the enjoyment of the game is using the spreadsheets as well (and i hereby confirm i am perhaps a little sad!).

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    1. I do a bit bit of everything when it comes to trading. Some station trading, some regional trading and some hauling (both within and between regions).

      I don't use spreadsheets for any of it. Sometimes I use EveMarketData to find a place to ship stuff to but sometimes I just take everything sitting around in inventory, load it up in a blockade runner and do a cluster milk run.

      By "cluster milk run" I mean moving stock around between a main hub and several of the secondary hubs associated with that main hub. At each stop I drop off items to sell there and pick up other items that were bought there to sell elsewhere.

      Occasionally I courier off a few billion from one main hub to another and very rarely I load up a blockade runner and do a milk run between 4 main hubs (no need to hit both Hek and Rens since they're in the same cluster).

      I can see spreadsheets being much more useful for manufacturing. There you're dealing with not just the item's price but fluctuating prices for multiple materials as well as other complications like invention and potentially long wait times to complete the entire process.

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  6. "I'll even go lower than cost if I'm sure the reset buy price is going to go down significantly too though I do have to be careful about that. I have to be quite certain he's not manipulating me into selling under cost (I've manipulated others into doing that on occasion myself)."

    You never know on how much wallet / buffer / profit in the product someone else had that the trader can compensate away. Going under cost can still be profitable for such a player in the long haul. Realize that when pushing this limit.

    Sidenote, speculators who watch certain markets happily push you out way down the profit margin, just to get back into control.

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    1. Without writing a book in response, let's just say I know how that game is played and I'm pretty good at it. It's a bit like playing poker, the better players don't win every hand. They lose quite a few hands but they usually come out ahead at the end of the night and rarely lose big money. Over the long run they win more than they lose.

      BTW, I like when speculators try to push me out buy lowering profits. I can be extremely patient using low volume, slim margin orders to hold *his profits down and break *his control.

      Pushing prices down is also a great way to find out the "real" bottom prices and get some cheap stock myself.

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    2. Know the market ways myself as well.

      Haven't stumbled into your patience yet. Lets keep it that way ;). Haven't had people breaking my speculations. Just people asking me, or better, begging me to buy their stuff back.

      Yeah, the bottom is good to find, but the game of finding the top of product elasticity is far more interesting if you ask me ;)

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    3. Big numbers are nice to see for sure. The only problem is the bigger the margins get, the more competition moves in. Depending on how frequently you make a sale, it's often better to sell 10 for 20% profit each than 1 for 100%.

      The patience mostly involves leaving "guard" orders up for however long it takes. Let him stress out trying to control it while tying up lots of capital and making tiny profits.

      I like playing a contrary game sometimes too. If everyone else is pushing the price up, I push it down... If they're pushing the price down I'm pushing it up. If they're selling, I'm buying, if they're buying, I'm selling. Of course, that works best in high volume markets and you can't do that if there's a good reason behind it, something other than player manipulation like increased or reduced demand due to patch changes.

      Like when mindlinks became available at LP stores, the oblivious ones who kept on mindlessly buying Mining links for 500+ mil and trying to resell them for over a billion had to have taken a beating.

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