The Goons, who fancy themselves as being newbie friendly released their guide. Besides telling poor newbies to rat, they also told "When selling, don’t just accept a Buy Order - you’ll probably lose a fortune for the convenience of a quick sell. Look at all the Sell Orders in the region, ordered by price. Then right click the item again to sell it, and under Advanced put up your own sell order, undercutting the previous lowest sell order by .01 ISK. Remember to check on your orders in your Wallet, to make sure somebody else hasn’t undercut you."
I've been preaching against 0.01-ing since I started to make a billion a day. I wrote that it's cartel, babbled about price elasticity, shown my own results and this horrible thing is still here. I now try to explain its stupidity as simple as possible.
It is obvious that the cheaper something is, the more people will buy it. If you look at the buy orders, you see exactly that: people who are ready to buy for that price instantly. Of course there are buyers for more money too, but less. If you look at the current sell orders, you don't see the current market price. You see items that no one bought because they are too expensive. Of course someone might buy them later, but at the moment no one bought them.
Let's use numbers: there are 5 buy orders of item X are for 1000000, 1000000.01, 1000000.02, 1000000.03 and 1000000.04 and 5 sell orders are 9000000, 8999999.99, 8999999.98, 8999999.97 and 8999999.96. No, it's not exaggeration, I see such imbalances all the time. In nullsec, for a less common item, it can be much worse. What do these numbers tell you? There are 5 people who want to sell for 9M but can't, and 5 others who want to buy for 1M but can't. Do you really think that it's a good idea to be the sixth guy who tries to sell at 9M?
OK, you open price history and see that once a week one sells for 9M. 9M is good money. You can be the guy who sells for 9M, right? Yes, you can, if you are the lowest seller in the moment when an impatient fool enters. How can you be the lowest seller? By being 0.01 lower than the previous one. This is what they all think. So they update their orders often. If everyone updates with the same frequency, you'll have 1/6 chance to be the lucky seller. You can increase your chances by updating more often. But they can defend themselves by updating even more often. At the end you'll be sitting by the market window all day, updating that damn order. I'm still not exaggerating, people (and bots) are doing exactly that.
What can you do? You can set up your sell order for 8.5M instead. Tomorrow you will find that they undercut you by 0.01. Then you update to 8M and you'll see that some of your competitors disappeared: they sold their items. This is the point! By undercutting deeply, you drive the price to the point where all of you sell. For example you drive it down to 5M and you see that there are 6 sells/week. Congratulation, you reached market equilibrium.
Let me show a real example, when I broke down the price of an implant used in armor battleships in K-6K16, the capital of TEST alliance:
The same applies to buy orders. If you want to buy something, don't join those morons who update their orders all day by 0.01 at 1M, set your order to 1.5M and. They will "overcut" you. So cut again the next day, until you finally buy. You will see that for example for 4M they bought too, there are 6 buys this week, everybody made a buy. This is the definition of market equilibrium: everyone buys/sells who wants for that price.
OK, so everybody can sell for 5M and buy for 4M? How? Because people are impatient. They are ready to pay some premium to buy now (for 5M) and sell now (for 4M). If you are thinking that you could buy it for 4M and resell it for 5M... well, you are on the way to never-ever rat, mine, mission or pay real money for the game. Being able to afford a titan before you could fly it is just a bonus.
I've been preaching against 0.01-ing since I started to make a billion a day. I wrote that it's cartel, babbled about price elasticity, shown my own results and this horrible thing is still here. I now try to explain its stupidity as simple as possible.
It is obvious that the cheaper something is, the more people will buy it. If you look at the buy orders, you see exactly that: people who are ready to buy for that price instantly. Of course there are buyers for more money too, but less. If you look at the current sell orders, you don't see the current market price. You see items that no one bought because they are too expensive. Of course someone might buy them later, but at the moment no one bought them.
Let's use numbers: there are 5 buy orders of item X are for 1000000, 1000000.01, 1000000.02, 1000000.03 and 1000000.04 and 5 sell orders are 9000000, 8999999.99, 8999999.98, 8999999.97 and 8999999.96. No, it's not exaggeration, I see such imbalances all the time. In nullsec, for a less common item, it can be much worse. What do these numbers tell you? There are 5 people who want to sell for 9M but can't, and 5 others who want to buy for 1M but can't. Do you really think that it's a good idea to be the sixth guy who tries to sell at 9M?
OK, you open price history and see that once a week one sells for 9M. 9M is good money. You can be the guy who sells for 9M, right? Yes, you can, if you are the lowest seller in the moment when an impatient fool enters. How can you be the lowest seller? By being 0.01 lower than the previous one. This is what they all think. So they update their orders often. If everyone updates with the same frequency, you'll have 1/6 chance to be the lucky seller. You can increase your chances by updating more often. But they can defend themselves by updating even more often. At the end you'll be sitting by the market window all day, updating that damn order. I'm still not exaggerating, people (and bots) are doing exactly that.
What can you do? You can set up your sell order for 8.5M instead. Tomorrow you will find that they undercut you by 0.01. Then you update to 8M and you'll see that some of your competitors disappeared: they sold their items. This is the point! By undercutting deeply, you drive the price to the point where all of you sell. For example you drive it down to 5M and you see that there are 6 sells/week. Congratulation, you reached market equilibrium.
Let me show a real example, when I broke down the price of an implant used in armor battleships in K-6K16, the capital of TEST alliance:
The same applies to buy orders. If you want to buy something, don't join those morons who update their orders all day by 0.01 at 1M, set your order to 1.5M and. They will "overcut" you. So cut again the next day, until you finally buy. You will see that for example for 4M they bought too, there are 6 buys this week, everybody made a buy. This is the definition of market equilibrium: everyone buys/sells who wants for that price.
OK, so everybody can sell for 5M and buy for 4M? How? Because people are impatient. They are ready to pay some premium to buy now (for 5M) and sell now (for 4M). If you are thinking that you could buy it for 4M and resell it for 5M... well, you are on the way to never-ever rat, mine, mission or pay real money for the game. Being able to afford a titan before you could fly it is just a bonus.
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