Market Discussions

Hi all,

I got a question. The "margin trading scam" is where someone sets a minimum number of items to buy on a buy order right?

So they think someone snaps up all the items (that presumably they themselves sold at a lower price), then they cancel their buy order?

I was confused where in Jita I've seen ppl selling expensive officer mods for about 1.1B and there are buy orders of the same item in Jita for 1.3b.

They were minimum items "1" so they weren't a margin scam as far as I could see.

Is there somehow a scam where the buyer doesn't have the isk in their wallet to cover the buy order or something?

I didn't want to spend 1.1b on an item to find out I couldn't sell it at a profit.

So there's no way to detect this scam? You just have to hope a sell order will complete? How are you supposed to make profits doing normal trading or station trading?

But then again, the buy orders were for 1 item not multiple, so I assume its just that their wallet won't cover the money they make from you buying their item.

keep in mind that escrow gets depleted to service buy orders before any isk is taken from your wallet.

the scammer can deplete his buy order's escrow by selling items to himself and thus run the margin trading scam without having to set min. quantity > 1.

I've never done any margin trading before, but my understanding is this:

-- || --

The scammer has 2 officer mods which are usually worth 200mil ISK each, and he puts 1 unit on a sell order overpriced at 1bil ISK.

Now the scammer has exactly 4bil ISK in his wallet.

He sets up a buy order for 2 units of the mod at 2bil ISK each.

Normally 4bil ISK would be taken from his wallet and put in escrow to cover the order.

With Margin Trading at V, only 24% of the ISK needed to cover the order is put into escrow, so instead of 4bil ISK, only .96bil ISK is put into escrow.

Now the scammer has 3.04bil ISK in his wallet, and .96bil ISK in escrow.

If he sells his remaining officer mod to himself at 2bil ISK, he will drain the .96bil ISK in escrow and the remaining 1.04bil will be taken from his wallet.

Now the scammer has 2bil ISK in his wallet plus another 2bil ISK for selling the officer mod to himself, and 0 ISK in escrow.

He now empties his wallet by sending the remaining 4bil ISK to his alt, thus removing his ability to cover the purchase of the other officer mod.

Had he only put up the order for 1 officer mod for 2bil, he would have left 480mil in escrow and a savvy trader like myself would have noticed this was a scam and found another unit of the officer mod for its regular 200mil ISK price and sold it to his order at 480mil, thus forcing the order to complete and gained 280mil profit at the scammers expense.

edit: Fixed a math error

The trick to the counter-scam here is that you need to get a hold of the officer module for the real price. So while the scammer is selling his own for the inflated price of 1bil, if you can find one for the actual price of 200mil - perhaps in an adjacent region - then you can make a profit off his escrow.

So it would work like this:

--||--

You see the scammers orders, selling 1 unit of officer mod for 1bil ISK and buying them in a different station for 2bil.

From experience you know this is way overvalued for this module, and thus probably a scam. So you fly over to a different region and see that there is one for sale at the actual value of 200mil ISK

You buy the 200mil ISK and fly back to the station that the scammer has placed his buy order of 2bil ISK

You then estimate that the scammer probably has Margin Trading trained to IV, so that means he has ~32% of the 2bil ISK buy order value in escrow, which equals 680mil ISK.

The important part here is that the actual value of the module most be less than the scammers estimated escrow. Since 200mil ISK is less than estimate 680mil ISK, than you can counter-scam him.

Now due to the mechanics of the market, even though the scammers buy order says he's paying 2bil for that module, he will be forced to automatically attempt to purchase any sell orders valued less than that.

Knowing this, you put up your officer mod for 650mil and he will automatically attempt to buy it at the price of 650mil.

Since he has 680mil in escrow, the transaction will complete and you'll have gotten 650mil for a module that only cost you 200mil.

However, had the scammer cleared escrow before hand, that 680mil won't be there, and the transaction will fail. But since you bought the module for its actual price instead of the scammers inflated module, you can probably just resell it for about the same you bought it - while the scammer is stuck having to pay the brokers fees for his failed scam.

--||--


I hope that clears up how to counter-scam a Margin Trader scammer. I'd say most of the smart ones probably clear escrow, but you might be able to at least get the ones who don't fully understand how it works.

Mah papi always told me "if it's too good to be true, it is"

Most traders depend on the Margin Trading skill for day-to-day operations and leverage, so "yes". It can be abused for "evil", depending on your definition of that, but it's mostly used for "good" (see previous comment).

If you're an idiot like me it can also make for some rather amusing market mess ups haha, but yes, it does have its place in allowing traders to have more buy/sell orders than they can normally handle, thus allowing them to diversify more.

Hello OP it seems this has been explained to you very well, but i have a few observations to add:

1. Margin Trading Skill is a valuable and useful trade.

Those of us who trade almost daily (when I care to log on anymore) use it to free up money that can be hard at work in other areas or on other orders. In this way it increases you purchasing and transactional reach in ways I think I could not do without.


2. It is not a "scam"

Although those some who use the skill the way you have described may intend to make ill gotten gains off those who are unaware, this is by no means a scam. It is however a way to use the greed of others to enrich oneself. Why is it not a scam. If i offer you a CNR and you get a regular Raven, that is a scam. If I offer to buy your CNR and then decide not to that is a broken deal. What makes it is a scam is that you did not get what you expected when you paid and the seller intended to give you something other than agreed.

So called margin trade "scams" are different because among other things they are based on two seperate transactions. The loss occurs because people buy items either with or without any idea as to their intrinsic value in the hope they can the sell them for ridiculous profit. If the original purchase had less value than what was paid that is not a scam. That is poor judgment.
If the subsequent deal to sell that item fails you should be left with an item worth what you paid for it. If it is not then you used poor judgment or took on too much risk and lost. You do not have to look far to determine who is at fault.

To carry the analysis a step further, suppose you saw a bid to but 10k of X for 1000K isk and you found 10K of X at another location for 200 isk. Hoping to make a great deal you buy it. While in transit someone else sells to the order or the bid is retracted. Is that a scam? What if the going market rate for X is only 1 isk? Scam?

Use proper judgment and do your homework and this forum will have fewer people calling for the end of what is a viable and useful skill just because they are too greedy and lazy to do some research or suffer buyer's remorse.

3. Minimum units

Please avoid all bids that have a minimum amount above 1 unless you can rationally posit a reason for this. You will be much better off. Those who use the so called margin trade "scam" most often set minimum units above 1 unless it is a high priced and rare item. This helps you spot deals that may be less savory and hopefully makes you start your pricing research.


HTH

Wow, another goon.