Monday, April 30, 2012

Station Trading 102: Day-to-Day Operations

In the second part of the station trading guide, I'll look at item selection and the direct practices involved in day-to-day operations. As I've said before, station trading is not a difficult task, but there are a lot of little nuances that you can learn from in order to start trading more effectively and sooner. Let's start by taking a look at choosing what items to trade in.

Item Selection
You can't trade in everything. You are limited by number of orders (even with an army of alts), the isk you have available, and most importantly, your time. The point of having a station trading alt is that it is a source of semi-passive isk, and in order for this to work for you, choosing what to trade in is essential. The question, then, is how to decide what you should aim for. In my opinion, it breaks down to four essential factors, which you can then analyze based on your own desires and capabilities. The four categories are Price, Margin, Volume & Volatility. Let's break it down step by step.

Price is pretty straight forward. This is simply how much you pay for the item. If you can't afford to have a couple of Marauders in your hangar or on sell orders waiting for someone to take them off your hands, then you probably can't trade in them (to start, at least).

Margin is the difference between the top of the buy orders and the bottom of the sell orders. Obviously you want to maximize profit, so finding ships and modules with higher margins is often a very good thing.

Volume is the quantity traded per day (or month, year, etc). Higher volumes lead to quicker turnover of items. This affects how quickly you get the return on your investment. For example, Gyrostabilizer II's have a much higher volume traded than Naglfar dreadnaughts (see below). The in game market browser is great for this. Go to Price history --> Show Table, and look under quantity. Note that this is regional data, so the number in station would be ever lower than this quantity typically.

Quantity: Greater than 200 traded every day

Quantity: 1 traded over the last couple weeks

The final factor is volatility. This relates to how much the price can change and how quickly it does so. This is especially important because you don't want to buy at one price and end up losing on the sale if the market price drops. The in-game browser is again an excellent resource though. If you go to Price History --> show Graph, you can see the general price trends for up to a year in the current region. Typically, higher volume traded leads to lower volatility. An interesting example is the Tornado. The Tier 3 Battlecruisers have been trying to stabilize under a period of overwhelming inflation, and you can see the price wavering over the last 3 months.

The problem with these four factors outlined is that they are often at odds with each other, and this is where you need to decide for yourself what is important. Margins increase with increasing price, but you also often find lower volumes and higher volatility (Check the table for an Obelisk, for example). On the other hand, you could trade in items with lower margins at generally lower prices, but you will have high volume and low volatility (Gyrostabilizer II). In the latter case, however, you're also going to have to update your market orders more frequently because there are so many people competing for these common items. 

My recommendation is dependent upon your status in terms of commitment and capability. If you don't have a ton of capital to start with, then you have no choice but to start in lower priced items and work your way up. There is nothing wrong with trading in Magnetic Field Stabilizers and Ballistic Control Units. One of the first groups of items I traded in was +4 implants, although I wouldn't necessarily recommend it now. All it comes down to is managing your risk and deciding how often you are willing to update your market orders.

Daily Operations
Running trade operations is relatively simple. In the first few months, it will be a lot of trial and error, and you should constantly be evaluating your performance. Especially in this early phase, it is crucial to review your item selection and keep an eye out for some more lucrative industries (higher or similar margins with better volume, for example).

Ultimately, it comes down to updating orders in such a way that you get them filled and put on sell orders. Personally, I'm one of those traders who increments by 0.01 isk when I have been beaten out on a buy order. There is no reason to jump up by any higher amount or round it off to a cutesy number. You are a trader, and you make your living based on the small margins available to you. Why would you cut into your own profit? 

I try to update my orders 1-3 times a day depending upon how busy I am. That number is often just one time a day though, and sometimes not at all. Generally, one update takes me about 15 minutes, but you'll find very quickly that your profit in a given day is very closely tied to how often you update your market orders. I find that about 40-60% of all of my trades occur within the first two hours of updating my orders. Its exponential decay in frequency of sales after the two hour mark. To put it simply, other traders just move in too quickly for you to stay on top in market hubs. I've also found that updating orders is more beneficial at certain times of day than others. For example, when all of the Americans come home and update their respective orders around 5pm (GMT -5), its not a great idea to refresh your orders at 4:45. 

I also have a specific way of updating my orders, although you can definitely find something else that works for you. My method is this: I update buy orders first, followed by sell orders. Then, I put all of my stock on sell orders (as long as I'm not competing with myself), and as I go through, I replace buy orders if need be as well. I have found that this is the best way to do it because after you update buy orders, you'll often see items come through very quickly. This way, by the time you get to selling ships and modules, you can put the very recently acquired items right back on the market for a quick turnaround.

Those are the basics of how I run my trade enterprise. It is not overly complex, but there is a lot of thought in it at the end of the day. The fundamental part of trade operations is choosing items that give you a good return on the investment of capital and your time. The more you can update your orders, the more you can expect to see in your hangar for resale. Next time, we'll take a look at some of the more advanced topics in the trade industry. Stay tuned for Station Trading 103 coming up later this week.

If you missed Station Trading 101, check it out here.

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