Trading – A Beginner’s Tutorial

Opening Disclaimer – I am not the ultimate fount of trading knowledge.  This article is not intended for people who already know what they’re about, nor for people that are succeeding wildly.  There are more ways to succeed than I outline below, and if you’re doing one of them – you’re already doing it right.  Also, any items given as examples should be considered examples only, not endorsements of that specific item as a good trade project.

That out of the way….

There are many ways to make your fortune in Eve, and while trading is the least SP intensive – it’s the most personal-skill intensive.  With such a vast and varied market, and so many people competing so heavily in it, it’s easy for new traders to feel overwhelmed.  This article will attempt to break down the basic forms of trading, and give advice as to how to proceed in them.  However, none of this information is an “I win” tutorial – it will still require the reader to be thoughtful, diligent, and self-motivated.

First – the most basic principals.

#1. Avoid buying from a sell order, or selling to a buy order.   While sometimes this is a valid idea, most often it represents a dent to your profit margins.  When you want an item, place a buy order for it.  When you want to profit from an item, place a sell order on it. (Ed. – Unless you want speed, for time-based opportunities.)

#2. Never turn the drive for more profits into a job.  Even if you’re bad at the various isk-earning opportunities, isk will come with time.  Stick with “fun” over “efficiency” – even though this guide may make recommendations on what is most efficient, ignore them when they conflict with your enjoyment.

#3. Remember that all buys/sells are subject to taxation and broker fees.  The margin of an item must cover this amount, or you will be trading at a loss.  The tax/broker fee amount is visible on your wallet screen, at the bottom of the “Orders” tab.

#4. High margins (a large difference between the price to buy something and the price to sell it) are nice, but the item’s velocity is far more important to your profits.   Velocity here refers to the rate at which your buy order will be filled, then your sell order on the same item purchased.  Trading 1,000,000 items with a 10k margin per day is far better than 1 item with a 1,000,000 margin.

Now, on to specifics.

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Import/Export Trading

The first, and most common form of trade for newer players is referred to as “import/export trading“. (Ed.- Some would contend that station trading is more common)

Simply put, this form of trading involves placing a buy order at location A, then moving the items to location B, where a sell order is placed.  The average price on the item is obviously lower at A than B.  While it is possible to place courier contracts to have the items moved for you, early-on this represents a dent in your profitability.

Allow me to build a hypothetical import/export trader.  Please note, at each hypothetical “stop” in this trade, the trader would check to assure his orders were the “top” in that particular market.

Trade hubs represent a large quantity of finished goods at lower-than-average price, and a large demand for raw goods at a higher than average price.

Our hypothetical trader places a large buy order on cruise missiles in Jita, which is filled in a few hours.  These missiles are hauled to a backwater mission hub, too far to be a convenient trip to Jita for the mission runners.  The missiles are relisted on the mission-hub market at a substantial markup.

While waiting for the missiles to sell, the trader places a large buy order on every type of salvage he can afford to, then returns to Jita.  Back in the trade hub, a new buy order is placed for more missiles.

The trader now has missiles selling, missiles buying, and salvage buying.

The second missile buy order fills within a few hours, and the new missiles are loaded up and taken to the mission-hub.  By now, a substantial amount of salvage has filled into the appropriate orders, and the missiles will have largely sold off.  Offloading the new missiles on a new sell order, the trader loads up the salvage and heads back to Jita again.

The salvage is now relisted as a sell order in Jita (again, at a substantial markup), and a new order for missiles is placed.  Repeat ad infinitum.

Obviously – this method requires a lot of hauling time, but represents the best combination of velocity and margins possible for newer traders.

Also, there are tricks to eliminate some of the “slack time” in this haul-fest.  While traveling, look for industrialist activity.   If you see a strong sign of production in a given system, place a buy order on minerals in your mission-hub, then place a sell order on those minerals off in the industry location.  Place another buy order on the produce from that industry hub – typically cheap T1 frigates and cruisers – and make hauling that kit part of your return trip to Jita – where it will all sell at substantial markup, giving multiple points of profit to the trip.

All of the above is, of course, hypothetical – but it is easy to quickly see how a bit of market research along the hauling route can create several profitable stops.  The important thing is to learn the differing demands of differing areas.  Trade hubs are always hungry for raw materials and finish products, but have lots of consumables.  Mission hubs are always hungry for consumables, but have lots of raw materials.   Industry hubs are always hungry for minerals, but have lots of finished products.  Spend a bit of time looking over the market in each system you pass through, and learn the levels of demands, and how they vary.

—————————————-

Station Trading

The next form of trading is known as “Station Trading

This type of trading can be considerably less work than import/export, or considerably more – all depending on your own market research.

In it’s most basic form – one settles down in a trade hub, places buy orders on items, then resells those items at that station at a markup.

In this type of trading, there’s really two factors that make-or-break success.  A focus on velocity over margin is important, (Ed. – Unfortunately not a hard and fast rule. In the end, it is up to you to decide if it is profitable.) and as much diversification as can be afforded.

In any trade hub – you will not alone in trying to station trade.  There will be many others trying to top your orders, some of them willing to update their orders for 18+ hours a day.  But you don’t have to defeat these people – only bypass them.

In the major trade hubs, and especially Jita, massive amounts of items change hands.  Even the most fastidious order-updating-fiend will occasionally have his order filled, and the order below his, and the order below that – because of the sheer volume of items being offloaded.

This type of velocity is where diversification really pays off.  While staying near the top on just one item can require constant order-monitoring, staying near the top on at least a few of 30-40 different items is quite easy.  Place your orders over a wide variety, and there will always be at least some actively selling or buying.  While updating your orders 23/7 would represent more profit – it’s far more work than is necessary.  A widely diversified basket of items will require only a few minutes per day (or as your experience and capital grows, per week).

But what to invest in, specifically?

Firstly, always look at the amount of items being bought or sold in a given time period.  I can not stress enough, you want this amount to be as high as possible.

But it’s not enough for there to be a lot of sales only, or a lot of buys only.  Ideally, you want a mix between the two – and fortunately, the market can give you this information.

By pulling up the market details for a specific item, then going to the “Price History” tab – we’re presented with quite a bit of information.  Near the bottom are a series of bars, showing how many of that item are traded per given time period.  The red line represents a “5 day average” on the trade price of the item, the green line a “20 day average“.

The average pricing lines are the important bit, here – a line that is almost exactly in the middle of the graph shows an item that is being bought exactly as much as it’s being sold, perfect for station trading.  A line near the bottom means your buy orders will fill quickly, but your sell orders will take very long.  A line near the top means the reverse.  When station trading – an average near the center is always ideal, though not required.

The final piece of information on this screen that we’ll examine is the Donchian channel – which is the redish-colored swath painted across the chart.  The top of this mark represents the most expensive sell order that was filled.  The bottom represents the cheapest buy order that was filled.  This gives a generalized idea on the margin of an item – but also on the volatility of that item’s price – or how likely an item is to fluctuate in a given time period.

So, as a station trader – build a wide basket of items that fit the criteria described above.  Trade in them for a week or two, then evaluate the numbers on each item individually.  See which items were high profit, which were poor.  Trim away the poor, and pick new items.  Repeating this process over and over gives one a widely diversified, high performing basket of trade items that can quickly amount to massive amounts of income – for a minimal amount of work.

But, in the end, you’re not restricted to Import/Export Trading, nor to Station Trading – you can do both.  You can supplement them by looking for good grabs in the contracts screen.  You can buy minerals to build your own produce, then sell that at an even greater markup.  You can speculate on price shifts, hoarding away materials on the hopes that the market swings your way.  Eve is a sandbox game, and the market reflects this – but with this little bit of information, you’re prepared to start your own sandpile.

-Lui Kai

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~ by luikai on June 10, 2009.

4 Responses to “Trading – A Beginner’s Tutorial”

  1. Nice guide! Thanks!

  2. Great Guide, Probably the bese one on trading that i’ve found – thanks!

  3. very good, thanks 🙂

  4. Thanks–one of those guides where that one little nugget just clicks.

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