Trading in a virtual economy II

Lately I have moved on to trding specialized skill books. The profit margina are good and they move relatively fast. With my current wallet i can afford to have several hundreds of millions held up in prders without much fuss. The evolution went from the low spread ammo market to the higher spread but implant market to the battleship module market planetary commodities and finally skill books. In between I have dabbled in courier contracts and tech 2 ship sales. I have learned a couple of things. How to exploit a market bit who matches orders to the risk of taking courier contracts which demand large collateral.

Trading Successes

It's amazing how very few people in this capitalist society we live in know anything about trading. I mean, being that free markets and trade is the tenant that capitalism is built upon, you would think that people would pay more attention to it. I have to admit though, I myself was one of the ignorant masses back in my high school and university years. Finance was always a 'dirty' subject and a 'necessary evil' in the beautiful world of absolute truths that I used to like to believe that we live in. It was not a 'pure' science, and thus was not worthy of study. But how little did I know back then. In truth, the study of the markets is the study of human nature, and understanding them is like understanding oneself. There is a value in knowing how people think. Using that to your advantage. Manipulating circumstances to tip the scales of the game in your favour. This is the skill set necessary to be successful in this life, its just that nobody told you that when you were born, nobody gave you an instruction manual. Why? Well because its evolutionary. For there to be winners, there must be losers. So how to separate the winners from the losers? Setup a system by which the winners are the ones who seek out the means to win. Who are perceptive enough to know that a game is being played, and cunning enough to outwit the others who have gotten to this realization.

So it came to pass, in a round-about fateful way that only destiny itself could manufacture, that I came to learn the ropes of trading from a game, a simulated market, but with participants of all kinds that you would find in the real world represented in it. To succeed in such a market, virtual or otherwise, you have to learn to outsmart your opponents. To beat them to the punch, and to persevere in seeking out opportunity where they didn't even think to look.

Here is an some example trades in which I am rather proud about. I know it is tradition for traders never to give out trade ideas, as they guard these as close as magicians guard their secrets, but heck it's just a game and I have many more secrets in the markets that I have up my sleeve that I would not share with the general public. (if you are truely a winner, you will learn them yourself)

This one is a awesome case of a market discrepancy and taking advantage of a market 'feature'. The feature I speak of is the relative knowledge gap between newbies and experienced players. Take a look at the snapshot. The item in question is the Civilian Afterburner. I made over 30million isk in my first month trading on this item. As you can see in the prices, my average buy was 60k, and I sold at average of 280k. That's almost 500% profit! Why? Well, I asked myself that question when I first chanced upon this gem of a trade. And using brains and logic I found the answer. It's quite obvious (as everything in markets usually are if you stop to think about it) to people with a logical and analytical background. The key thing to note here is that the 'Civilian' version of ship modules are normally underpowered, underperforming parts that are given to you when you start the game for free, as part of your starter tutorial missions. I believe in one of those missions, players are asked to sell this part to the market. As a beginning player, most people don't know how the markets operate, so they just dump the part at the best bid price, and move on with their training missions. That explains the low buy prices. Now the high sell prices are interesting. As I mentioned, these civilian parts are given to new players as part as their tutorial missions, and they are not manufacturable in the game by players. They are so horribly underpowered I don't know who would want to use them anyway. BUT apparently, some people (rich established players) sometimes have very tight power constraints on their ship fits, so it becomes impractical to use a normal afterburner on their ship, in which case the civi version is a cheap and low power option to give their ships some boost in speed, even though it may not be as good as a normal afterburner. These buyers have money and they cannot be bothered to shop for a low price, especially if the difference between 60k and 250k means little to someone who has several billions of isk. Thus this market was ripe to exploit, and profit I did.

This next one is my most recent win. On Dec 1st 2011 CCP released new battlecruiser class ships which could mount battleship guns (one larger class than normal battlecruiser guns) That's all fine and dandy, but as any good trader knows, where there is a market for new goods, there is profit to be made. I quickly did a scan of the most popular battleship guns in the market looking at the past historical trading volumes. Of the highest was this gem of an item below. This gun was trading at around 3.5million several days before the release of the new ships. I quickly put down several hundred million in buy orders and managed to score quite a large lot of them at the 3.5 mil mark. 2 days after I did so, the price started jumping up as players started fitting out their brand new ships. As you can see below, the price has almost doubled.

These are just 2 of the many ways in which I have been able to play the markets to profit. The cool thing is that doing this, even in this game setting, has made me much more aware of how real world markets work, and to appreciate what a trader does on a day to day basis on the trading desk of a large firm. It truely is, what capitalism is all about. The funny thing is that I don't even play this game much for the actual 'spaceships' part anymore. I just do my trades, setup my orders for the week and watch my profits come in (or lose my shirt) via my iphone. Its fun to con people and rip them off when you don't have to worry about breaking any laws. The thrill of trading is academic. It's not whether you actually make money or lose money, its the thrill of winning. And winning at the markets is sweeter than any other win which requires a 'fair' game (like chess, or poker). Because winning at markets can be achieved by many different means: skill, perseverance, attention to detail, insight, or just plain dumb luck. But at the end of it, if you can make money and win, the sweetest feeling of all is that you have outsmarted others.

Trading simulators and EVE

Remember back in the good old days of yore in high school business class where as part of the project for the semester was to partake in a stock market game ? You know the one I'm talking about. The one where you got 1 million dollars o invest in anything and you looked at the financial section of the paper for the first time ever.

If you were like me, you probably just put all you cash into a couple of penny stocks and hoped for the best. New entrants into the market are always clueless. The markets is something of a game for the driven, the bold, the beautiful, and the risky. The tiny numbers in the newspaper was all we had to go on, what determined the winners from the losers. That and Lotus 123.

Remember a little time later on a small company called yahoo came along and gave us the gem which is yahoo finance section which would provide free charting tools so for the first time ever we could visualize our stock picks and their past history? It was a godsend, and back seat investors popped up overnight. Case we all know that past performance is a great indicator for future gains. (disclaimers be damned!)

Well fast forward to the teenies, and we have EVE online. At first glance it's just a space mmo, where the primary goal of players is to get a bigger ship than others, blow them up, amass wealth, and build empires. On close inspection though one finds a hidden gem almost created and sustained as an afterthought to this virtual ultra capitalist economy, which is, a working virtual market. Note that I qualified it with "working" as there are plenty of games out there tooting a virtual economy including WOW and others. But in truth, those are all false economies as they lacked a free market. Additionally the economy of the other games are flawed because the basic building blocks of the economy ( raw materials ) required nothing other than time an effort to obtain, and there lacked a system of private ownership of property and land, thus private means of economic development. Also, not to be overlooked is the fact that you have a bunch of snotty nosed teens just wanting to pwn orcs in the game and lack of a sophisticated expert market participants. In EVE you have for the first time all these proponents and thus a virtual market is born.

You have speculators and hedgers, consumers and producers.

And thus we finally have a game where one can truely test ones mettle at guessing the markets. And playing the stock market game. It's taken 20 years but it's progress over the financial section of the local newspaper.

Test two!!

Just mucking with the settings.

Test

Citibank is no longer シーティー

Today I decided to try and deposit some dividend checks worth about the price of a Starbucks coffee. I was expecting them to charge me 1000 yen for the honour so was fully expecting it not to be economically worth it. Turns out that there are no commissions for cashing cheques for gold member accounts. Unexpected win! Guess the last time that I tried to cash cheques a long time ago, I was just a lowly scrub. Times change. So here is the thought. Most people will think of this as just another case of rich people paying less than the poor. The more money you have at Citibank the less you pay in fees and commissions. Well on the surface it may seem that way, but think if the incentive wasn't there to encourage people to put more money into their accounts and this increasing citibanks depository assets? Then they would be out of business. And the money that we save in waived fees and commissions are more than matched by our loss in opportunity and investment returns losses for not using that money somewhere else. It's all fair in capitalism. While I have nothing against helping out the disparaged and ones down on their luck but otherwise hard workers ( the fundamental backbone of building a society ) but people who just want handouts are counter productive and if society were left to them would erode the fundamental order in which we all live. The greater good would not be served.
Too much greed is bad. But no greed at all is just as counter progressive.

Why America has an obesity problem

Way too big servings!