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Are traders beneficial to markets (holy wall of text warning)
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Vaerah Vahrokha
Vahrokh Consulting
#21 - 2012-05-11 17:33:22 UTC
Maxpie wrote:
Interesting topic. As a corollary, I recently was reading that airlines face essentially the same problem the OP describes. Apparently airlines enter fuel contracts months in advance to lock in favorable prices


That would be forward contracts, an off-exchange contract related to the futures I described above.

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Debiru
Universal Fleet Operations
#22 - 2012-05-11 18:20:19 UTC
Hammer Crendraven wrote:
Markets all across eve are in a near stopage.

Citation Needed.
Darth Tickles
Doomheim
#23 - 2012-05-11 19:50:28 UTC
Debiru wrote:
Hammer Crendraven wrote:
Markets all across eve are in a near stopage.

Citation Needed.


The prestigious Journal of Pulled from my Butt.
Ariana DeSoto
High-Tech Duct Tape
#24 - 2012-05-11 20:03:44 UTC
Darth Tickles wrote:
Debiru wrote:
Hammer Crendraven wrote:
Markets all across eve are in a near stopage.

Citation Needed.


The prestigious Journal of Pulled from my Butt.


Awesome book. Can't wait for the blockbuster movie next summer.

I don't always play EvE, but when I do, I prefer it to be a masochistic sandbox hell. Stay wardecked my friends.
Mu-Shi Ai
Hosono House
#25 - 2012-05-11 22:32:02 UTC
Pinstar Colton wrote:
There are two kinds of traders in my eyes, Station only traders...who never, ever undock and merely buy and re-sell items on the market (and possibly items in other stations in the region using the trader skills) and traders who buy, haul and then sell for a profit.

The station only traders help level out the peaks and valleys in price, keeping the relative price of a good steady. That isn't to say large shifts in supply or demand can't uproot an established price point, but it is the role of station traders to keep the peaks and valleys in check (and profit from doing so).

Hauling traders fulfill a logistical need of the market. 1 billion trit, while valuable, is useless if scattered across 25 different systems and held by 100+ different people who want to sell it. The hauler helps smooth out the peaks and valleys of prices across distance, connecting supply with demand and profiting from the difference. It is because of them that the 1 billion trit can be brought to market properly and thus supply a manufacturer who needs materials on that kind of scale.

Without station traders, the price of a good would swing wildly, even without being pressured by outside supply and demand. Depending on the price of a good for your business would be harder if you suddenly had to buy more of it and found that the price was up 20%.

Without haulers, the markets would have difficulty supplying anything in bulk, and the availability of more niche products would be very sporadic.


I disagree. Many traders who never leave the station are also facilitating the movement and availability of goods in important ways. Not all station trading = speculation/manipulation attempts.
Kara Books
Deal with IT.
#26 - 2012-05-11 22:59:49 UTC
Lauren Hellfury wrote:
Oh look. Someone that only read the thread title.


(I'll be back in a bit when i've had time to formulate a coherent and concise response)


I didnt have time to write something, I.E was at work taking short 2-3 min breaks to check the forums etc, either way my original post stands, I dont want something like that happening.


OP:
Sometimes you take losses, sometimes you win.

I made some pretty funny blunders during the mineral rush, but in the end iv recovered about 70% of my investment and sitting on the rest, either way this was my fail-safe as I planned, for exactly this worst case scenario, Im a very solid market annalist and even I havnt made any ISK from direct reliance on mineral prices going up, I have broken even on that front

In a free market you must understand competition is FIERCE.

Its just like the real world, sometimes you lose, sometimes you win, the important thing is to keep the Winnings 2/3rd's of the time and the losses 1/3rd or less aim for it don't be discouraged Push and Push till you find a style that WORKS for you.


I am also very discouraged with capital ships, I was planning on going into capital ships but as I begin to see the bigger picture, where are these minerals coming from? highsec prices are being crushed with the prices we see in Low-sec/Nulsec.

From my point of view, this mineral price thing is far from over, clearly something very big has started, because it hasn't ended, if it does end, then this would be one of the biggest market blunders a merchant has ever made (I doubt whoever/whatever party pulled this is stupid)
Rhivre
TarNec
Invisible Exchequer
#27 - 2012-05-12 00:39:01 UTC
Mu-Shi Ai wrote:
Pinstar Colton wrote:
There are two kinds of traders in my eyes, Station only traders...who never, ever undock and merely buy and re-sell items on the market (and possibly items in other stations in the region using the trader skills) and traders who buy, haul and then sell for a profit.

The station only traders help level out the peaks and valleys in price, keeping the relative price of a good steady. That isn't to say large shifts in supply or demand can't uproot an established price point, but it is the role of station traders to keep the peaks and valleys in check (and profit from doing so).

Hauling traders fulfill a logistical need of the market. 1 billion trit, while valuable, is useless if scattered across 25 different systems and held by 100+ different people who want to sell it. The hauler helps smooth out the peaks and valleys of prices across distance, connecting supply with demand and profiting from the difference. It is because of them that the 1 billion trit can be brought to market properly and thus supply a manufacturer who needs materials on that kind of scale.

Without station traders, the price of a good would swing wildly, even without being pressured by outside supply and demand. Depending on the price of a good for your business would be harder if you suddenly had to buy more of it and found that the price was up 20%.

Without haulers, the markets would have difficulty supplying anything in bulk, and the availability of more niche products would be very sporadic.


I disagree. Many traders who never leave the station are also facilitating the movement and availability of goods in important ways. Not all station trading = speculation/manipulation attempts.


I agree with Mu-Shi....and that rarely happens!

I never undock anymore, but I region trade. I feel that if someone is selling me X million of a mineral on a remote station somewhere, then someone there will want to be building from it too, or if someone sells me a ton of modules, then people in the same area will want them.
I could undock, bring them back to the hub and flip them faster, but then if I do that, I am forcing people to come to the hub, which in turn affects the hauling people, because, lets face it, if you have to come to the hub to buy, you may as well sell your stuff there too.

For me, trading is about providing goods where people are, so they do not have to move.

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Liberty Eternal
The Scope
Gallente Federation
#28 - 2012-05-12 00:52:07 UTC
I think an important point is that this was a very rare event. What happened here is that traders tested the markets for minerals. If prices had continued to rise, it would have been good for manufacturers and some others too. But this is a price exploration that really had to happen - that it didn't go as hoped is just one of those things.
Darth Tickles
Doomheim
#29 - 2012-05-12 00:58:29 UTC
Liberty Eternal wrote:
I think an important point is that this was a very rare event. What happened here is that traders tested the markets for minerals. If prices had continued to rise, it would have been good for manufacturers and some others too. But this is a price exploration that really had to happen - that it didn't go as hoped is just one of those things.


It's definitely a point worth mentioning. Speculation isn't an exact science. Not all bubbles are based on deluded greed or calculated maliciousness. Poor calculation is a perfectly reasonable explanation, though shadowy cabals of Illuminati financiers is, of course, far more interesting and compelling.
Tekota
The Freighter Factory
#30 - 2012-05-12 04:16:58 UTC
Vaerah Vahrokha wrote:
Tekota, traders are a market facilitator, they provide liquidity to they system and reduce spreads.

Your issues come from the lack of hedging. You are going long today on minerals and short weeks laters on freighters.
This is similar to a currency pair trade.
As long as you are going with the trend (as they say "the trend is your friend") your long operation brings in manufacturing profit + trend induced price shift profit.

If you go counter trend like now, your long operation brings in manufacturing profit - trend induced price shift profit, which may easily cancel each other or even result in a loss.

There are 3 ways to avoid this loss:

1) Analyze the price swings on a weekly chart. You want to buy while "in the green", particularly after a price action pattern. Weekly price action patterns are quite powerful and easily last the full duration of a freighter production.

2) If this was RL, you could just buy anti-cyclical or any sort of "inverted trend" securities so that whatever happens to minerals prices the other security will act the opposite way. This way you always have the manufacturing profit saved (but will give up on the trend induced profit of course).

3) If this was RL or wanted to set up a serious deal with a supplier (possible in EvE but would require some trust), you'd just buy minerals futures contracts. This way you have a fixed and certain minerals price that will not change whatever the underlying markets do.

...


If I've understood this correctly it basically boils down to "buy minerals when they're cheaper" (and/or "sell freighters when they're expensive")?


I've two issues with this as an approach; the first is that it essentially becomes an excercise in mineral trading rather than manufacturing - if all I'm going to do is make mineral price bets on what the basket will look like 24 days from now then why bother with the manufacturing stage, why not just trade minerals. I've also always considered the stance of "the goods I make are cheaper because I get raw materials cheaper" to be the stealthy brother of "the minerals I mine are free".


The second issue is purely a cash flow one. Now I've only recorded price inputs every 12 days when a batch goes in/out but looking through my history, the last time a batch saw minerals at such a price as to acheive a modest 100m profit on a charon sold at today's prices (roughly 3m isk per slot per day) would have been 31st March.

Now, undoubtedly there are bigger outfits out there who can cover that sort of cash flow, but I have to doubt it would be worth the risk - current operations see 20b committed in minerals either in production, sat on sell orders as finished goods, or available to buy the next batch of minerals, I add to that a further 5b cash flow reserve to allow one batch to sit on sell order 12 days further if market requires (ie. to ride it out), add to that the roughly 15b worth of cap prints and we're already looking at an operation that is holding 40b hostage. Adding a further month and a half's mineral reserves would add another c.15b to that reserve, essentially turning a (pessemistic) 3% ROI per month investment into a 2.2% ROI per month.
Zendon Taredi
Tier Four Technologies
#31 - 2012-05-14 09:13:59 UTC
We provide decent buy orders for the lazy.
Vaerah Vahrokha
Vahrokh Consulting
#32 - 2012-05-14 11:36:37 UTC
Tekota wrote:


If I've understood this correctly it basically boils down to "buy minerals when they're cheaper" (and/or "sell freighters when they're expensive")?


The futures option is exactly to avoid to do that, since you'd build with prices known months in advance.

But let me be frank in the following reply to:


Tekota wrote:

I've two issues with this as an approach; the first is that it essentially becomes an excercise in mineral trading rather than manufacturing - if all I'm going to do is make mineral price bets on what the basket will look like 24 days from now then why bother with the manufacturing stage, why not just trade minerals. I've also always considered the stance of "the goods I make are cheaper because I get raw materials cheaper" to be the stealthy brother of "the minerals I mine are free".


The second issue is purely a cash flow one. Now I've only recorded price inputs every 12 days when a batch goes in/out but looking through my history, the last time a batch saw minerals at such a price as to acheive a modest 100m profit on a charon sold at today's prices (roughly 3m isk per slot per day) would have been 31st March.

Now, undoubtedly there are bigger outfits out there who can cover that sort of cash flow, but I have to doubt it would be worth the risk - current operations see 20b committed in minerals either in production, sat on sell orders as finished goods, or available to buy the next batch of minerals, I add to that a further 5b cash flow reserve to allow one batch to sit on sell order 12 days further if market requires (ie. to ride it out), add to that the roughly 15b worth of cap prints and we're already looking at an operation that is holding 40b hostage. Adding a further month and a half's mineral reserves would add another c.15b to that reserve, essentially turning a (pessemistic) 3% ROI per month investment into a 2.2% ROI per month.


1) Raw23 and Rykker Bow and James Tundra (and others) achieved super-awesome returns by analyzing and handpicking exclusively the choices that would yield them a KILLING.
You went for a known low profit venture. It's your fun, I also love to make freighters but then you have to deal with the fact that it's a low entry barrier industry niche and thus the margins are thin (yes 15b worth of cap BPOs is low entry at this age of the game).

2) Yes, regardless whether you hate it or not, you are trading minerals. In EvE (and in RL too), the first tier producers make things barely at profit or even with a loss. Yes, you spent 15B in BPOs and you tie 25B for turnover and yes you are just another industrialist in a game where products quality does not exist and where brand added value does not exist and where buyers can't care the less about your costs.

Once you remove BPOs from the equation (because nobody will recognize your startup costs, you don't have the power to enforce them) you are really just selling minerals shaped in the form of a ship, this is why the market treats you like you are trading minerals.

3) It's also a clear example of why finance rules above actual production and why in our rotten world became inconvenient to be constructive and DO, when you could earn more just with empty talk and moving money.
Once everything has been commoditized, globalized, standardized, depersonalized, all you are left with are:

- branding
- saving on the source costs.

You can't brand anything in EvE so you have to save on the source costs. Guess what, your running source costs are minerals. You are trading minerals, with the handicap your resale times are delayed while said minerals are stuck in producting the ships.

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Caleb Ayrania
TarNec
Invisible Exchequer
#33 - 2012-05-14 20:58:18 UTC
Let me try and say this without totally derailing the thread.

The reason current traders might seem to be only of the speculative type and thus not as beneficial to the economy is; because that is their only current option.

I have tried for many years to explain that with so few dedicated traders the apocalypse market order nerf is the most disruptive mechanics ever introduced to the EVE economy. Everything price wise becomes dependant on hub centric numbers.

There is currently no distribution of reseller businesses, because its basically not possible. Take any single part in the chains of EVE production and you can not service any area well in more then a single location. There are 3 variants of each type of ORE, and just having buy orders to setup a refining service would take a huge amount of orders. Alternative would be using regional ranged orders, but that would potentially lock up assets where you are not willing to go. Ideally what we need is some solution to get back to a no limit system, so materials that are needed locally can be easily shipped and service resold and bought where needed.

Talking about effectiveness of economy and investors making liquidity available is utterly redundant, when you dont have the option to create an effective service sector and distribution network.

We are in gridlock in these regards, and until we get that fixed we will never have say Astral mining stations where the sell price of ore is always optimal, or research hubs where there is invention, where all the tools needed are seeded by players facilitating a specialized market. The mere fact that this is impossible is why we see so many weird price fluctuations.

On a side note I would like to ask OP if you have buy orders up of the product you build? In the current state of inefficient economy you should always have a buy order on anything you produce and modify it according to the prices of offered or incoming raw materials. The "do everything inhouse" approach is currently defended by the pseudo socialistic bias of ccps market mechanics. You get more contracts internally in a corp then externally to the public. I have said it before, that is equivalent to selling more lego to lego employees than public customers. Also the npc strawman bias makes it beneficial to be uncorped in regards to trading.

If these issues got attention production and all types of service areas would improve greatly.
Kirichan
Legion Enterprises Inc.
#34 - 2012-05-14 21:03:29 UTC
Traders are middlemen, I'd rather not have my isk tied up in merchandise when I can have it producing something. Would I make more isk with sell orders? My margins would certainly be higher, but from past experience my isk per hr would be lower. Certainly that could change in the future.
Caleb Ayrania
TarNec
Invisible Exchequer
#35 - 2012-05-14 23:38:41 UTC
Kirichan wrote:
Traders are middlemen, I'd rather not have my isk tied up in merchandise when I can have it producing something. Would I make more isk with sell orders? My margins would certainly be higher, but from past experience my isk per hr would be lower. Certainly that could change in the future.


Problem with that is ccp turned the economy upside down on the market, which cripple production a lot..

Having the option to set limit on a buy order regarding volume is totally reverse.. It should be at least ALSO on the seller side.

With a feature like that we would get a lot more serious bulk order markets. Where its the supplier doing the bulk and not the producer setting the price. Competition is reversed, and its about time we got ccp to go through all these things.

I can not see how anyone benefits from leaving these blatant economic flaws in game, when they are possible to resolve.
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