Holding The Line

The above picture depicts one of my favourite chapters from The Fellowship of the Ring, where Gandalf faced the Balrog at the Bridge of Khazad-dûm in the Mines of Moria. Although admirably portrayed by Sir Ian McKellen in Peter Jackson's movie, Tolkeins original prose always felt more emotive to me.

"You cannot pass," he said. The orcs stood still, and a dead silence fell. "I am a servant of the Secret Fire, wielder of the flame of Anor. You cannot pass. The dark fire will not avail you, flame of Udûn. Go back to the Shadow! You cannot pass."

 Breevok? You feeling OK?

Actually I don't know how I am feeling right now. Prices are beginning to stabilise on the server now a week has passed. Volatiles which were once 100g are now less than 10g. And much as we would all love to be selling our enchanting mats for 50g per dust, those heady days are gone and we have to adjust to the realities that lay ahead. Or do we?

We knew prices were always going to drop as time passed but do we have an opportunity to slow the slide and make gold along the way? I believe we do.

The easiest way to do this is to buy everything and relist it at a higher price. This can work, especially in a market where supply is low and you can keep control relatively easily. But when supply is large, keeping others out of the market is going to get expensive very very quickly - and generally ends up with you losing gold.

Take volatile life - produced en masse by herbers everwhere. Prices are down to 7g50s on Cael Alliance. To buy the entire stock would cost me around 5k. And I would not get rid of the 500 VLs before someone came along and undercut me. Even if I sold a few for 15g I would need to clear half my stock to get my money back.

It can be very difficult to pick the right areas to delve into. But ultimately prices will continue to slide across the board until the reach a plateau. However there will be peaks and troughs along the way and this is the key to making gold.

We know that the week in wow is very cyclical. Day to day and week by week, there are some very common patterns across most servers.

For example, weekends. On weekends people play more, therefore farming increases and prices drop. During the week the prices increase as supply dwindles and demand remains.

Likewise during a day there will be more demand at key times of day - just after school finishes, just after work finishes. And when you throw time zones into the mix then there are always going to be windows of opportunities that can be exploited.

With a terrible cry the Balrog fell forward, and its shadow plunged down and vanished. But even as it fell it swung its whip, and the thongs lashed and curled about the wizard's knees, dragging him to the brink. He staggered, and fell, grasped vainly at the stone, and slid into the abyss. "Fly you fools!" he cried, and was gone.

I admit that I do this a lot - then worry that a wrong decision has been made. But ultimately you are either going to win big or lose small. For example I made a judgement call this morning - todays JC daily is cut three jasper gems. It was 7.30am NZ time, so 5.30am server time. Most players would still be sleeping.

I checked the price of jasper and bought the entire stock out (around 100 gems) for, on average, less than 50g each.

5k invested. I've seen selling through the day for 75-80g. I've currently sold around 20 bringing in about 1400g.

So I am down about 3.5k at the moment. Am I panicking? Well not really. Firstly the mass influx of need for jasper will be at 7pm my time (when Australia finishes work) so more gems will sell.

But what if all the JCers have three jaspers stashed away because they are forward thinking? Not a biggie, because even if I am left with a load of gems with no use, I'll transmute them into Dream Emeralds and buy a cut with my JC tokens. Cut rare gems are still 100g on the server, plus it will get me a few levels on the JCing There are always way to cover your ass with these kind of investments.

This jasper example is probably too specific though - there is a reason for demand today (i.e. the JC daily) what about when you are just looking at a constant daily demand which doesnt have the big peak every few days? Can we do anything to stop the slide towards the plateau?

To an extent yes. It the typical buy low sell normal. But when normal is moving downwards the best we can do is slow the descent, and this is where the gold can still be made. The key is thinking of the undercutter when making your purchases.

Let me give an example. Many people would think that the prices of an item are normally distributed:

 but they are arent. Instead they are a left skewed distribution:

There will be the cheapest price and then there will be a load just a little more expensive and then a tail that dwindles away to ridiculously high prices.

OK so we buy the cheap ones:

Ultimately this has several affects:
1. We now have all the cheapest items
2. The average prices (arithmetic and median) have increased
3. When Mr Undercut comes along he will post at a higher price than he would have previously.

I hope this makes sense. Say there were 100 volatile airs on the AH as follows:

2 at 48g

3 at 50g

10 at 55g

20 at 58g

10 at 60g

5 at 67g

10 at 70g

5 at 75g

5 at 80g

10 at 100g

20 at 101g+

Mr Undercutter comes along and posts at 47g99s99c. The bottom price continues to slide south

However if you had previously come along and bought the bottom 5 VAs then when Mr Undercutter arrives then he posts at 54g99s99c. You've invested 246g at this point but the bottom price is still higher than it was when you first scanned the AH. But posting your auctions somewhere about the peak (say at 65g ), any sales will net you 15g profit per item. It will also move the median average upwards, which is another slowing of the slide towards the plateau.

But they wont sell for 65g I hear you cry! Well actually they do. People generally go an buy X of an item. An engineer for example is likely to buy 10 Volatile Airs to make 5 electrified ether, . More likely than buy just one which they cannot immediately use. Its they way people's heads work. Demand will outweigh supply during peak times, and because you have already snapped up the cheapest, the purchases are going to start at the 55g level then move upwards. Just by making your purchase you have already moved the sale of those items closer.

Where this fails is something like we are seeing with volatile life. The market is swamped with over 800 items listed. 80% of the entire market is below 10g and the cheapest is 7g. To make a significant dent into the market would mean big investment with little return, just because there is too much of it around. Sometimes you really do have to let a market go, because some battles just arent worth fighting - just roll with it and come back as Gandalf the White in the next book :)