Guild Wars 2

Yes, seriously. This isn’t meant to be a defense of every way to make money on the TP, but rather focuses on the two most commmon methods of market making (or ‘flipping’), and mystic forging.

Market Making is when you’re submitting buy orders and sell orders on a single product at the same time, and taking advantage of the price difference. How is it productive? The more people market making, and the faster that they trade, they more the sale price is pushed down, and the bid price pushed up, approaching equilibrium. How does this help Average Joe? Well he is much more likely to buy or sell instantly than the power trader. Because the power traders, by competing with each other, have pushed the sale price down, and the bid price up, Joe is able to buy the item cheaper, and if it drops for him while leveling, he can sell it instantly (his personally preferred method) for more money.

Now, if every player chose to submit sell orders instead of selling instantly, there’s an argument you could make that the power trader is ‘stealing’ those profits. But they don’t. And a lot of the time it just makes sense to buy items instantly. In defense of buying instantly, consider that a level 20 dagger doesn’t help you if you don’t get it until you’re level 25.

Mystic Forging: Players making money at the mystic forge do it by taking advantage of market inefficiencies where the cost of ingredients is less than the average value of the result. Take item A worth 1s, and item B worth 10s. If you could transmute 4 of item A into one of item B, you’re making a profit and helping out the rest of the economy.

Why is this the case? Consider what would happen if nobody took advantage of that recipe. There’d be a lot more of item A on the market, reducing their price, and fewer of item B’s, increasing their price. For Average Joe, it means that he can sell his less useful item A’s for a better price, and buy item B’s for less. Sure, he could theoretically make the most money by mystic forging item A into B, but that’s an unreasonable expectation for every player. Substitute ‘crafting’ with ‘mystic forging’ and the principle still works. In the real world, mystic forging type activity goes by another name. Manufacturing, buying less valuable products, doing ‘stuff’ to it, and selling the results.

Now, like I said, this isn’t a defense of every method of making money on the TP. Ways of manipulating prices like cornering the Market can produce profit for the power trader while not adding economic value.

Cool story bro, tell us more how ppl engaging in these activities magically create money from thin air to now have tens of thousands of gold from the margins (it seems they don’t get it from other players from what you’re wrote). Not to mention every time an item is bought/resold tax eats even more money, which costs the final buyer of an item more and it appears to benefit the buyer that he pays more…wut? Even without flippers market comes to an equilibrium based on supply and demand so no idea how you can claim reselling does that if it happens automatically + you don’t put a single extra item on the market.

As for the mystic forge part, I’d agree. If you can buy cheap things and make more pricey ones that’s adding value. Simplistically: mystic forge=buy ore, forge sword, valued added. Flipping=buy ore, sell ore for tax+margin to make money. Can you seee the difference?

So somehow when Joe the Plumber wants to buy doubloons for his legendary, and finds the cost jacked up to ridiculous heights, that’s beneficial to him?

Kid Taylor.5479:

So somehow when Joe the Plumber wants to buy doubloons for his legendary, and finds the cost jacked up to ridiculous heights, that’s beneficial to him?

What’s happening to silver doubloons isn’t flipping. The market manipulation happening with silver doubloons had the market manipulator buying up most of the sell orders up to a price he deemed fit, and then setting up buy order walls no one can fill due to the rarity of the item. When impatient people unwilling to wait for this buy order wall to be fullfilled as it would take a ridiculously long time given the low drop rate of the item, they start placing buy orders at prices above this wall. Eventually, the manipulator can get rid of this buy order wall he set up as there are enough real buy orders at this new price point. Both the buy orders and the sell orders are increased in this scenario.

The way the OP described flipping involves no massive withdrawal of supply to drive up sell order prices. The sell order prices are actually lowered from flipping as the flipper is getting the items from buy orders, and most likely undercutting the lowest sell order. Buy order prices are increased by the flipper in this case.

I’m pretty sure it was Richard Dawkins who once said (paraphrased)

“The problem with democracy is that it teaches all views are equally valid. One persons ignorance is as valuable as another person’s knowledge”

Unfortunately the unwashed masses have already decided “they know what’s going on with the economy” so no matter what the economists tell them they arn’t going to believe it. They “know” the market is being manipulated, and they “know” bots are their real friend because it reduces T5 prices, and they “know” arenanet is controlling the gem market to make life suck no matter how much evidence to the contrary is presented.

Its not a display of ignorance to think that flippers aren’t in it for altruistic reasons…

Arbitrage servers a purpose, but that purpose servers sellers, not buyers. The purpose is to drive the price up and provide immediate gratification to sellers – not value to those sellers, gratification. Arbitrage is all about recognizing that something is selling for less than what people will pay for it. I just got 3 charged loadstones in the last hour and a half of farming for them out on Orr. If I were a professional farmer rather than a person intending to craft with them, I’d be ecstatic that I just popped 12g of goods off of low-grade trash mobs. Thats a good return on time. More people should be doing it.

Instead I’m a crafter pleased to have advanced 1% towards my goal of creating an Infinite Light. I don’t even look on the TP for them anymore because its a waste of my time to buy them compared to farming them myself. Unfortunately that means there’s only one sensible activity for advancing my goals. Maybe somebody else wants to arm the power traders with the coin to block them again on the next hot property -3.6g of that 4g going into their warchest for the next bit of arbitrage. Me, I’ll be keeping my coin for travel expenses to Orr.

@ Nike: The purpose of flipping (within the GW2 TP) is not to drive the price up or down, but to recognise the opportunity for profit when the difference between the two prices is great enough to outweigh the costs and risks involved. The side effect of this behaviour is that the “sell now” and “buy now” prices move closer together.

The simple fact is that anyone who makes a lot of money from flipping or otherwise playing the trading post is hurting other players.

Everytime a trader makes a profit with no risk another player takes a loss with no gain.

TooBz.3065:

The simple fact is that anyone who makes a lot of money from flipping or otherwise playing the trading post is hurting other players.

Everytime a trader makes a profit with no risk another player takes a loss with no gain.

Not accurate. Other players might be trading (Selling) other high priced items that they would normally like to hang onto in their bank to gain enough money to purchase the other item. This in fact increases the amount of that once held product on the TP and should lower that price since there will now be more in the market.

It’s all about choices.

^ this

The trading post, unlike farming, does not generate money from thin air.
If someone makes 100 gold, someone else just lost 100 gold +15%.

Field Marshal.7946:

TooBz.3065:

The simple fact is that anyone who makes a lot of money from flipping or otherwise playing the trading post is hurting other players.

Everytime a trader makes a profit with no risk another player takes a loss with no gain.

Not accurate. Other players might be trading (Selling) other high priced items that they would normally like to hang onto in their bank to gain enough money to purchase the other item. This in fact increases the amount of that once held product on the TP and should lower that price since there will now be more in the market.

It’s all about choices.

I’m not sure I understand, could you help me see how arbitraging inefficiencies in the market to close the gap between a buy and sell price increases the amount of product on the TP?

TooBz.3065:

The simple fact is that anyone who makes a lot of money from flipping or otherwise playing the trading post is hurting other players.

Everytime a trader makes a profit with no risk another player takes a loss with no gain.

Sorry but that’s so wrong…

I approach the TP in several ways when I’m playing the game.

As a “flipper”, I’m trying to buy items low and sell them at a profit, but who am I buying items from? Players who don’t wish to wait for the goods to sell before they receive their money. They are getting better prices for their goods than they otherwise would have. Who am I selling to? Players who don’t wish to wait to receive the goods they want. They are getting their goods at a cheaper price than they otherwise would.

However, when I’m not actively “playing” the markets, I will quite often buy and sell goods on the TP using the current prices, as I may wish to free up inventory space or want the item for crafting purposes and don’t wish to waste time waiting for the order to be filled.

Flipping is not a risk-free money making opportunity, I’m spending my gold and time to buy and relist goods with no guarantee that those goods will sell at the price I want. I’m taking the risks that other players don’t want to take, and that’s why I make the profits. Those who you claim are being hurt by this, aren’t prepared to spend their time waiting or assume the risk of not selling at a higher price.

Also, in response to the “market maker” argument. A true “market maker” is obligated to fulfill all unmatched buy and sell orders on the market and a prevailing market price. The “market maker” makes his money off of the spread.

That is NOT what is happening in the TP. What is happening here is speculation, market manipulation, and/or arbitrage.

I can understand how buying items off the trading post is a benefit to the person who listed the item and listing an item is a benefit to the person who later buys it.

However, in doing so you have driven down the sell price and driven up the buy price, meaning a third party gets less for what they farm and pays more for what they buy.

TooBz.3065:

I can understand how buying items off the trading post is a benefit to the person who listed the item and listing an item is a benefit to the person who later buys it.

However, in doing so you have driven down the sell price and driven up the buy price, meaning a third party gets less for what they farm and pays more for what they buy.

Yes you’re correct, presuming that person has the patience to set buy orders and list sales in the first place. Even I don’t do that for every item I buy/sell on the TP however.

I believe however, that these 2 prices would converge even without people engaging in flipping, but this activity speeds up the process.

Aoreias.6384:

…Because the power traders, by competing with each other, have pushed the sale price down, and the bid price up, Joe is able to buy the item cheaper, and if it drops for him while leveling, he can sell it instantly (his personally preferred method) for more money.

Bother it, only two paragraphs in and one of the wheels has come off.
Since early November, this situation has become untenable, as the rate and quantity of items dropping for people out in the field has been significantly reduced.
Scarcity of materials and items drastically changes the playing field, as is quite in evidence across the board.

puffintoast.6501:

Aoreias.6384:

…Because the power traders, by competing with each other, have pushed the sale price down, and the bid price up, Joe is able to buy the item cheaper, and if it drops for him while leveling, he can sell it instantly (his personally preferred method) for more money.

Bother it, only two paragraphs in and one of the wheels has come off.
Since early November, this situation has become untenable, as the rate and quantity of items dropping for people out in the field has been significantly reduced.
Scarcity of materials and items drastically changes the playing field, as is quite in evidence across the board.

Which does not change the point the OP was making. The value of items in our little virtual economy will always change as the game develops and matures (and the player base reacts to those changes). The competing power traders the OP alludes to will still help move the bid and sale prices closer together towards the current market value for the item.

Ryuujin.8236:

I’m pretty sure it was Richard Dawkins who once said (paraphrased)

“The problem with democracy is that it teaches all views are equally valid. One persons ignorance is as valuable as another person’s knowledge”

Unfortunately the unwashed masses have already decided “they know what’s going on with the economy” so no matter what the economists tell them they arn’t going to believe it. They “know” the market is being manipulated, and they “know” bots are their real friend because it reduces T5 prices, and they “know” arenanet is controlling the gem market to make life suck no matter how much evidence to the contrary is presented.

How fitting that you have chosen to quote someone like Richard Dawkins in support of your elitist diatribe.
I am not even going to bother picking apart your random jumble of glib summations, horribly superior affectations and generalisations, suffice to say the arrogance in your assumptions that anyone who protests at the glaring change in the market affecting the quality of their game play is not inherently a fool because they fail to subscribe to your opinions of the situation.
Ignorance is most evident in the entire spectrum of trader arguments currently ignoring the fundamental problem to banter endlessly about whether or not their methods are helpful or harmful, to allay whatever personal doubts they may harbor, or reinforce personal viewpoints and justify their activities.
None of it matters a tinker’s cuss in light of the simple, well evidenced fact that since November the availability of materials and items, the cornerstone of the market itself, has been altered. Hence, the market has been altered.
Squabble on, as I’m sure you all will, fingers firmly in ears, counting your coins and reveling in your cleverness, never a thought to the source or the reason for the obvious. You are servants to your own demise.

puffintoast.6501:

Ryuujin.8236:

I’m pretty sure it was Richard Dawkins who once said (paraphrased)

“The problem with democracy is that it teaches all views are equally valid. One persons ignorance is as valuable as another person’s knowledge”

Unfortunately the unwashed masses have already decided “they know what’s going on with the economy” so no matter what the economists tell them they arn’t going to believe it. They “know” the market is being manipulated, and they “know” bots are their real friend because it reduces T5 prices, and they “know” arenanet is controlling the gem market to make life suck no matter how much evidence to the contrary is presented.

How fitting that you have chosen to quote someone like Richard Dawkins in support of your elitist diatribe.
I am not even going to bother picking apart your random jumble of glib summations, horribly superior affectations and generalisations, suffice to say the arrogance in your assumptions that anyone who protests at the glaring change in the market affecting the quality of their game play is not inherently a fool because they fail to subscribe to your opinions of the situation.
Ignorance is most evident in the entire spectrum of trader arguments currently ignoring the fundamental problem to banter endlessly about whether or not their methods are helpful or harmful, to allay whatever personal doubts they may harbor, or reinforce personal viewpoints and justify their activities.
None of it matters a tinker’s cuss in light of the simple, well evidenced fact that since November the availability of materials and items, the cornerstone of the market itself, has been altered. Hence, the market has been altered.
Squabble on, as I’m sure you all will, fingers firmly in ears, counting your coins and reveling in your cleverness, never a thought to the source or the reason for the obvious. You are servants to your own demise.

Asides from containing half a thesaurus of adjectives and some vapourous commentary on how evil money lenders in the house of god traders on TP are was there anything of substance in that post?

Ryuujin.8236:

Asides from containing half a thesaurus of adjectives and some vapourous commentary on how evil money lenders in the house of god traders on TP are was there anything of substance in that post?

I think he said something about the market having been altered since November and traders are in denial about it… I’m not really sure why he is conflating scarcity of loot drops with the activity of TP traders because, as far as I’m aware, there isn’t a direct connection.

Ryuujin.8236:

Asides from containing half a thesaurus of adjectives and some vapourous commentary on how evil money lenders in the house of god traders on TP are was there anything of substance in that post?

I see your comprehension is the equal of your wit.
You are actually putting yourself on the pedestal of a persecuted, quasi-biblical scapegoat?
If there are too many big words there for you, and you struggle to find meaning in posts such as that, might I suggest you return to the popularised science “for the unwashed masses” novels churned out by people like Dawkins?
I find myself wondering why elitist gold-snobs like you aren’t busy raking in millions on the real stock markets of the world, instead of spilling bland vitriol on discussion boards for video games.
Oh wait, too many words again? Apologies.

Astraea.6075:

Ryuujin.8236:

Asides from containing half a thesaurus of adjectives and some vapourous commentary on how evil money lenders in the house of god traders on TP are was there anything of substance in that post?

I think he said something about the market having been altered since November and traders are in denial about it… I’m not really sure why he is conflating scarcity of loot drops with the activity of TP traders because, as far as I’m aware, there isn’t a direct connection.

Seriously? My word but you power traders are a thick bunch.
No connection between product availability and the marketplace?
I would recommend you contact the institute that issued your economic qualifications, and demand your money back.

As far as the TP goes the only worries I have are people automating it (and I’m sure plenty do) and/or manipulating prices with coin and items from stolen accounts.

Other than that, it’s perfectly fair. If you don’t want people making money off you in a game like they do in real life, well, unlike in real life most of the time you can help yourself quite a bit.

First of all, be patient. Use buy orders and certainly don’t fill buy orders for ridiculously low amounts. Check out Guild Wars 2 Spidy for basic trends if you want to actually make a little coin as well.

puffintoast.6501:

Astraea.6075:

I think he said something about the market having been altered since November and traders are in denial about it… I’m not really sure why he is conflating scarcity of loot drops with the activity of TP traders because, as far as I’m aware, there isn’t a direct connection.

Seriously? My word but you power traders are a thick bunch.
No connection between product availability and the marketplace?
I would recommend you contact the institute that issued your economic qualifications, and demand your money back.

And I direct you to my prior post where I stated:

Which does not change the point the OP was making. The value of items in our little virtual economy will always change as the game develops and matures (and the player base reacts to those changes). The competing power traders the OP alludes to will still help move the bid and sale prices closer together towards the current market value for the item.

Again, why are you conflating two unrelated things. It is true that traders can take advantage of shifts in the market (e.g. increased scarcity of certain items), but there are underlying reasons why the market is shifting in the first place.

“Power traders” are exploiters who make the game worse by everyone else through two main ways:

1) They artificially increase the price of items in order to inflate their own profit.

2) They concentrate gold within the hand of a small minority, who is able to make more gold the more gold it has, thus leading to an even bigger gap between common players and the exploiters. As a result, prices can be artificially increased WAY beyond the reach of real players, since a small minority can afford those prices.

One of ArenaNet’s main flaws with GW2 was not limiting how much people can exploit the TP. Farming has been restricted through DR, which is great; but due to the lack of a similar system, exploiting the TP is basically unlimited and has many of the side effects that farming does.

Astraea.6075:

As a “flipper”, I’m trying to buy items low and sell them at a profit, but who am I buying items from? Players who don’t wish to wait for the goods to sell before they receive their money. They are getting better prices for their goods than they otherwise would have. Who am I selling to? Players who don’t wish to wait to receive the goods they want. They are getting their goods at a cheaper price than they otherwise would.

Pfff. Without you in the middle, the guy you are buying from would simply sell to the guy you are selling to; the first would be able to sell for a higher price, the second would be able to buy for a lower price, and we would have one less greedy middle-man in this story. A win for both seller and buyer.

Erasculio.2914:

Astraea.6075:

As a “flipper”, I’m trying to buy items low and sell them at a profit, but who am I buying items from? Players who don’t wish to wait for the goods to sell before they receive their money. They are getting better prices for their goods than they otherwise would have. Who am I selling to? Players who don’t wish to wait to receive the goods they want. They are getting their goods at a cheaper price than they otherwise would.

Pfff. Without you in the middle, the guy you are buying from would simply sell to the guy you are selling to; the first would be able to sell for a higher price, the second would be able to buy for a lower price, and we would have one less greedy middle-man in this story. A win for both seller and buyer.

I think you missed the whole point. It’s because there are players in the middle that players who wish to sell immediately get better returns and those who wish to buy straight away get cheaper goods.

Astraea.6075:

I think you missed the whole point. It’s because there are players in the middle that players who wish to sell immediately get better returns and those who wish to buy straight away get cheaper goods.

Astraea, you’ll drive yourself crazy trying to explain simple concepts like the Time Value of Money to these guys.

Edit: I tried to be a smart kitten based on what I thought the definition of that phrase was, then looked it up and realized it isn’t even close.

I read it and I still don’t get it.

I’m sure there are people who will never understand that there’s economically no difference between someone who does market making in this game, and a retail store. But this post isn’t really for them. Really more for the people who learn from the dialogue, and don’t feel the need to post because other people here are already defending the point well.

All that being said, I admit that there’s more than enough to fill up a post on how power traders can make lots of money without providing any economic benefit.

Astraea.6075:

Erasculio.2914:

Astraea.6075:

As a “flipper”, I’m trying to buy items low and sell them at a profit, but who am I buying items from? Players who don’t wish to wait for the goods to sell before they receive their money. They are getting better prices for their goods than they otherwise would have. Who am I selling to? Players who don’t wish to wait to receive the goods they want. They are getting their goods at a cheaper price than they otherwise would.

Pfff. Without you in the middle, the guy you are buying from would simply sell to the guy you are selling to; the first would be able to sell for a higher price, the second would be able to buy for a lower price, and we would have one less greedy middle-man in this story. A win for both seller and buyer.

I think you missed the whole point. It’s because there are players in the middle that players who wish to sell immediately get better returns and those who wish to buy straight away get cheaper goods.

And people who are patient are making equally worse returns.

Logun.5360:

Astraea.6075:

I think you missed the whole point. It’s because there are players in the middle that players who wish to sell immediately get better returns and those who wish to buy straight away get cheaper goods.

Astraea, you’ll drive yourself crazy trying to explain simple concepts like the Time Value of Money to these guys.

And what exactly is “r” in this game? Or even approximately.

Since nothing vanishes on the TP I am not getting any goods cheaper and faster then I would otherwise. I’m still getting them at the same speed and I’m paying a higher price.

Sure, someone might have sold a bit faster, but at others expense. Let the offers expire so people have to re-list their products and then you can tell me the trader is providing a service.

The consequence that I finally decided to take is not to participate in the TP at all anymore. My goods sell straight to the vendor if I don’t need them. If I am not able to obtain everything I need on my own in the long run (not now, in due time), which I can actually see happening due to the fabulous design of destroying random items to receive another random item – and the fact that fortuna rarely shines on my in this regard – well, then I will have to decide for myself.

It’s sad that there seems to be the need to explain the notion of trading – perhaps think of why that really is – here, in this game – not real world economics.

Just for the record so it doesn’t get lost I will repeat myself again, I have nothing against the person trading, but the system as it works here as a whole. (First game that I have this issue btw.)

TooBz.3065:

Field Marshal.7946:

TooBz.3065:

The simple fact is that anyone who makes a lot of money from flipping or otherwise playing the trading post is hurting other players.

Everytime a trader makes a profit with no risk another player takes a loss with no gain.

Not accurate. Other players might be trading (Selling) other high priced items that they would normally like to hang onto in their bank to gain enough money to purchase the other item. This in fact increases the amount of that once held product on the TP and should lower that price since there will now be more in the market.

It’s all about choices.

I’m not sure I understand, could you help me see how arbitraging inefficiencies in the market to close the gap between a buy and sell price increases the amount of product on the TP?

It won’t necessarily close the gap between buy and sell, but it does increase the amount of said item on the market and a better chance of movement in pricing.

Movement in pricing is always determined by amount of said item on the TP. Then the undercutting occurs. Too many people want to sell items fast for the cash and move on, especially with the limited amount of storage.

Not my fault for taking advantage of the swings and playing the market. I am not ashamed for doing it as a secondary money maker in the background while farming, doing other stuff in the game, or while I am at work.

I just don’t understand the hate against the power trader. Never will.

Field Marshal.7946:

(…)

Not my fault for taking advantage of the swings and playing the market. I am not ashamed for doing it as a secondary money maker in the background while farming, doing other stuff in the game, or while I am at work.

I just don’t understand the hate against the power trader. Never will.

Ok, I will try to convey some of the notions I have – again, this is nothing against the trader personally.

My premise first and foremost is – play this game for fun, play it your way.

So keep in mind, this is my point of view as a non-economist that anyone may certainly be welcome to make fun off!

I don’t think it’s the trader himself but the concept in an environment in which he does not provide a significant “service” in addition to artificially raising the bar for the long-term goals that exist here combined with the fact that the TP is almost the single viable way of generating income.

Let’s look at this in detail and I will try not to be too long.

It was said that one benefit (the power trader provides) is to get items on the market, people selling products they are sitting on. Ask yourself now why and try to obtain a perspective of people who’s main purpose is not the gold itself, but what it represents. They very likely now sell those products because they need more other items – the prices of those where increased also – no net gain here for Joe Schmoe.

The one things that bugs me personally the most for a while is this official comment

John Smith.4610:

Playing the market is not the only viable way to make gold. Not even close.
(…)

While essential true, it leaves out an important point – other than being forced into one particular style of play, let me call it the flavour of the month – the only viable way is the TP itself. Without selling your items on the TP – take this number with a grain of salt – your average “income” is likely around 0.25G/h.

Not only is the TP the most viable route for income, which is the only real gate for anything is this game – it is also to a very high degree the only source to reliably acquire certain items. Money should most definitely buy you time (not farming yourself etc) – buy you a convenience if you so will – but combined with the mystic forge it borders on being cynical.

This is all very, very new for me btw. Not once in any game have I thought this way, it does not phase me what other people do or have in general. Here it’s a mockery. Mainly because there is no alternative.

I will happily also buy gems with real money to convert them into gold – which is likely the reason for why this economy is the way it is – but I will most definitely not pay other players with it in this current state.

There you go – the reasons are wide and not isolated to just the buy and sell factor – it boils down to the TP being a too central component in itself. Which of course some people don’t see the problem with in the first place – because it is their central focus point as well. Same as I don’t understand some PvP problems – but then I don’t go into PvP threads and tell them off or try to tell them why that is the cats meow.

If this vision, that I perceived looking into this game – the grand idea of adventure and just play your way – is to come true, this has to be addressed and has to be looked at from various angles and not from the economist pov only.

TooBz.3065:

And what exactly is “r” in this game? Or even approximately.

It is not necessary that you be able to calculate the Time Value of Money for your transactions on the TP, only that you understand the key principles. Mainly that you understand that a buyer is trading time for a future value, while the seller is offering a discounted present value in exchange for money now. However, since you asked, I’ll be happy to answer your question and apply it to the TP.

Last night, I put in bids for 10,000 Bone Chips which were filled at 21 copper each. Tonight I sold 10,000 Bone Chips at 29. At the time I placed my bids, Bone Chips had a Bid/Ask spread of 21c/26c. When you factor in the TP tax, I could have traded the spread at a net profit margin of 1.3 copper (21/.85) per Bone Chip. Which option is the best return on my investment and time?

Time Value of of Money Basic Formula

PV=FV/(1+r)^n

PV is the present value of the asset (21 copper)
FV is the future value of the asset (29 and 26)
r is the compounded rate of return or “discount rate” (this is what we don’t know)
n is the number of periods (for us, we’ll use hours)

Algebra or Google will get you the above equation solved for r;

r=(FV/PV)^(1/n)-1

Now we can calculate our rate of return for our two options above. For the sake of simplicity, we’ll ignore the TP tax.

Option 1. Waiting 24 hours to sell your asset for 29 copper. As you can see below, it earns a compounded rate of return of 1.35% per hour.

(29/21)^(1/24)-1 = 1.35%

Hour 1 I 21.28
Hour 2 I 21.57
Hour 3 I 21.86
Hour 4 I 22.16
Hour 5 I 22.46
Hour 6 I 22.76
Hour 7 I 23.07
Hour 8 I 23.39
Hour 9 I 23.70
Hour 10 I 24.02
Hour 11 I 24.35
Hour 12 I 24.68
Hour 13 I 25.01
Hour 14 I 25.35
Hour 15 I 25.69
Hour 16 I 26.04
Hour 17 I 26.39
Hour 18 I 26.75
Hour 19 I 27.11
Hour 20 I 27.48
Hour 21 I 27.85
Hour 22 I 28.23
Hour 23 I 28.61
Hour 24 I 29.00

Option 2. Waiting 1 hour to sell your asset for 26 copper. As you can see below it earns a rate of return of 23.81% per hour. Now let’s assume (wrongly of course) that you can reinvest in or “flip” this asset every hour for the next 24 hours and that the market can absorb your increased buying and selling with no diminishing returns.

(26/21)^(1/1)-1 = 23.81%

Hour 1 I 26.00
Hour 2 I 32.19
Hour 3 I 39.85
Hour 4 I 49.34
Hour 5 I 61.09
Hour 6 I 75.64
Hour 7 I 93.65
Hour 8 I 115.94
Hour 9 I 143.55
Hour 10 I 177.73
Hour 11 I 220.05
Hour 12 I 272.44
Hour 13 I 337.30
Hour 14 I 417.61
Hour 15 I 517.05
Hour 16 I 640.15
Hour 17 I 792.57
Hour 18 I 981.28
Hour 19 I 1214.92
Hour 20 I 1504.18
Hour 21 I 1862.32
Hour 22 I 2305.73
Hour 23 I 2854.71
Hour 24 I 3534.41

Ah the wonders of compound interest. Now as I said above, this is unrealistic because of diminishing returns. However, if you don’t have a lot of money to invest (lets say 1s to 1g), you can very rapidly grow your net worth by active trading or flipping (Option 2). Once you’ve made it to 10g, your rate of return per hour will easily exceed that of a casual farmer (1-2g per hour). Once you’re worth 20g, your rate of return will exceed that of an expert farmer (3-4g per hour).

Around 50g, you’ll start feeling the strain and diminishing returns of active trading. This is when you should switch to swing trading (Option 1). This is because it requires much less time and attention than the active trader. Additionally, instead of actively trading a couple of assets, you will be buying 10-50 different ones in a very short amount of time, after which you can play the game, visit with your family, work, sleep, etc etc. So even though your hourly rate of return for Option 1 is 1.35%, you are now earning it on 50 different items at a smaller investment of active time.

TLDR; Traders or “Flippers” (as they are derisively called by the uneducated), sell their time for a discounted asset now in exchange for some future value of the asset, while reducing inflation and providing stability and liquidity to the market.

Honestly I never played the game to buy or sell money in a game world. Money is only important to me when I need it(in a game world). It’s always been that way in MMO’s and if I really need something I’d rather just have a way to farm things and go get them myself. I never minded people playing the trading post and earning money that way, I did my own thing. The real issue here is it simply isn’t worth the time to farm in this game. Everything that’s worth anything you want to hang on to for yourself, everything else is practically worthless, then the game puts in money sinks eating up all that money too there is very little profit to be had farming.

@logun and other traders

slightly off topic, but what do you do when only a part of your sell orders were filled? From his example, say he was only able to sell ~3-4k bone chips at that price, or his sell orders were undercut by another power trader?

penatbater.4710:

@logun and other traders

slightly off topic, but what do you do when only a part of your sell orders were filled? From his example, say he was only able to sell ~3-4k bone chips at that price, or his sell orders were undercut by another power trader?

Hold on to it until the price goes up, or sell at a loss, if you think it’ll go down further. A lot like what you do in real life if a stock you own has swung downward.

The price of any sell order has to include a risk premium for the chance the market will shift and the seller will have to eat the 5% listing fee to re-list, on top of the lower price from the market shift. The seller can, of course, keep the item listed and wait for the market to move again, though that is a gamble and you’re forsaking returns off of that money in the interim. Whether or not to re-list really depends on how actively you’re managing your money and the alternatives that presents.

There’s also the premium a seller needs to charge for the time spent researching and setting up the buy and sell orders – something being profitable doesn’t matter if it takes a lot of time to set up and causes money to trickle in slowly.

To make money you have to find the right combination of risk, velocity, and volume. The GW2 economy is inefficient and low information enough that there are plenty of opportunities of the sort, and profits to traders are only as high as they are because there aren’t enough people making the market to have competed those profits away.

penatbater.4710:

@logun and other traders

slightly off topic, but what do you do when only a part of your sell orders were filled? From his example, say he was only able to sell ~3-4k bone chips at that price, or his sell orders were undercut by another power trader?

Good question. My short answer is risk can be quantified and marginalized by increasing the number of variables that have the same projected outcome. Lets say there is a 95% chance that Bone Chips will go to 29 copper but their is a 5% it will either be higher or lower with a standard deviation of 5 copper. So it could be 24 copper or it could be 34 copper. By adding more variables like tiny venom sacs, tiny totems, garnet pebbles, etc., you will be able to keep the same confidence level, in our case 95%, but you will be reducing the standard deviation of your losses while maximizing your profits. This is the Hedge Principle that I’ve discussed in other threads.

I posted the first video of a Finance Theory class in the Gold per hour thread. Lecture #22 specifically dealt with reducing risk. There’s a lot of math in this so fast forward to the principles if you get bored.

I’ll have to wait until later to discuss the opportunity cost of holding onto bad investments and why you should take a loss instead of waiting for the market to recover.

Earning virtual currency in a virtual world is probably one of the least meaningful gaming experiences in existance. Understanding fundemental economics isn’t complicated to the average person, it’s just that the average person doesn’t care.

The average person doesn’t play video games to “work” or to enage in meaningless economic transactions on a graphical user interface that is completely void of ANY social interaction. The average person plays video games to participate in social activities.

Logan,

Thanks for the detailed explanation.

I don’t think I’m expressing myself well. I think that flippers extract value from the market without adding much to it. Immediate buy and sell offers would still be out there I don’t think there’s a liquidity problem.

You’re just closing the gap between those who purchase now and those who are willing to wait. Basically monopolizing the gains that can be achieved by waiting.

You are welcome to what you do, I understand that you enjoy it and I’m fine with that. But I think it’s unreasonable to expect us to thank you for it.

Calae.1738:

Earning virtual currency in a virtual world is probably one of the least meaningful gaming experiences in existance. Understanding fundemental economics isn’t complicated to the average person, it’s just that the average person doesn’t care.

The average person doesn’t play video games to “work” or to enage in meaningless economic transactions on a graphical user interface that is completely void of ANY social interaction. The average person plays video games to participate in social activities.

I’m loving it. Maybe because I’m a mostly solo player and I do enjoy the challenge of PvP, and this is a form of PvP.

Plus playing the TP, along with the explanations in this thread, are helping me learn something that might someday be useful to me in real life. Probably not at my advanced age and puny income level, but you never know.

I’ve even started dreaming about trading on the TP. Laugh if you want, but when I start having dreams about something I’m doing, at least I know my brain is engaged, which beats letting it turn to oatmeal.

Calae.1738:

Earning virtual currency in a virtual world is probably one of the least meaningful gaming experiences in existance. Understanding fundemental economics isn’t complicated to the average person, it’s just that the average person doesn’t care.

The average person doesn’t play video games to “work” or to enage in meaningless economic transactions on a graphical user interface that is completely void of ANY social interaction. The average person plays video games to participate in social activities.

Well, this trading helps immensely for you to understand real-life concepts without becoming a financial guy yourself. I’m not powertrading (or specifically, I’m scared to try) but what I’m learning from these discussions is amazing.

I hate market resellers/manipulators they jack up the prices of items and screw over the newbies.

Tell me more how every Dawn/Dusk is insta bought by a power trader, leaving us with a 500g precursor only thanks to their selfishness. (got my Sunrise, but I still live in disgust)

Why was this topic even created?

The original poster seems want to justify (in his mind) that power traders/market manipulators whatever you call them can be beneficial to the game economy. Unfortunately they only raise the prices of things and screw over the people who actually need them. Most game economies are enclosed and small enough that it’s very easy to manipulate on a large scale. ANet tries to mitigate this problem by making a global economy so that things aren’t that easy to manipulate but some people do still try.

Twomix.5384:

I hate market resellers/manipulators they jack up the prices of items and screw over the newbies.

That’s a falsehood for the most part.

I am majoring in economics. I do understand what is going in this thread.

You are right only in the short term. Which is to say that a few of the TP speculators might gain market power to the point they can drive prices sky high. And maybe on a few select items that have relative scarcity issues. Which Anet can fix my tinkering with drop rates.

But, and this is a big but, TP speculators do drive the price to an equilibrium in a much more rapid than normal buyers and sellers of gw2 goods. The reason being is that there is a LOT of speculators and with that much competition no one person can ever gain a significant foot hold on a lot of the goods in this game. So the price plummets when speculators find a good with a large profit margin, because all the competitors have to turn over their goods or wait for a long time for those goods to be used to ever achieve profits in the heavily traded markets.

xxxzavulonxxx.8413:

Twomix.5384:

I hate market resellers/manipulators they jack up the prices of items and screw over the newbies.

That’s a falsehood for the most part.

I am majoring in economics. I do understand what is going in this thread.

You are right only in the short term. Which is to say that a few of the TP speculators might gain market power to the point they can drive prices sky high. And maybe on a few select items that have relative scarcity issues. Which Anet can fix my tinkering with drop rates.

But, and this is a big but, TP speculators do drive the price to an equilibrium in a much more rapid than normal buyers and sellers of gw2 goods. The reason being is that there is a LOT of speculators and with that much competition no one person can ever gain a significant foot hold on a lot of the goods in this game. So the price plummets when speculators find a good with a large profit margin, because all the competitors have to turn over their goods or wait for a long time for those goods to be used to ever achieve profits in the heavily traded markets.

I got a co-worker who has Masters in Psychology who couldn’t get socially accepted for the life of him.

“The shoemaker’s son always goes barefoot”

Either that, or you’re a power trader yourself going in defense of your kind.
But keep the stories coming, love the good laugh.

Having an item change hands more than once on the trading post, simply by virtue of the nature of the 15% tax, benefits the game through combating inflation far FAR more than any minor price differences up or down in the case of 99.9% of items.