3Garrett3
03-19-2015, 02:40 AM
How to Dominate the Grand Exchange
Part 1 – The Basics
Updated: April 3, 2015
I have noticed that not many resources are publicly available to help people make money off the GE. In this tutorial, I hope to give you a general idea of how the RS3 Grand Exchange operates and how you can make money from it. The ideas that I discuss all directly relate to how the stock market works in real life, so this tutorial can give you some insight into stock investment as well. The information contained in this tutorial is not unique or secret and is gathered from various other sources.
In this first part of How to Dominate the Grand Exchange, I’ll lay out the basics of how the GE works, how to invest in items, and a few methods for finding good items to invest in. I’ll also explain the basics of item flipping and how to make money doing that.
Thank you to The Mayor because I stole his tutorial thread layout.
Also thank you to slacky, I would have never accomplished my MerchantAid script without his help, patience, code, and associated help. Derivatives of his code are found throughout my work, and I'd like to make a sweeping general credit because of that.
This tutorial is broken down into four main sections:
1. Grand Exchange Basics
Market Pricing
Trade Offers
Making the Transaction
Trade Limits
GE Updates
2. Grand Exchange Investing
Introduction
Trends
Support and Resistance
Choosing Items
Investing Tips
Advanced Support and Resistance
3. Advanced Graph Trends
Item Flipping
Introduction to Item Flipping
Finding an Item
How to Determine Profit
Performing the Flip
Flipping Tips
4. Technical Analysis (Part 2)
Introduction to Technical Analysis
How to Manage Data
Methods
How to Follow These Sections
Moving Averages
RSI
Aroon Indicators
Stochastic Oscillators
Bollinger Bands
Grand Exchange Basics
For many people, the Grand Exchange is simply a spot where they can dump their items after a long day of botting, or where they’ll gather their supplies before a long run of processing. I see many people who pretend the pricing works like magic which can be manipulated by sheer will power. Hopefully after a little reading you’ll have a much better idea of how pricing works in the Grand Exchange, and you’ll be 1 step closer to utter domination and piles of gold.
Market Pricing
Like many people, I hadn’t thought about what “market price” really meant until I became interested in merchanting as a money making method. When you see the term “Market Price” what you are actually seeing is the average price for the previous day’s trades. The value is simply there to give you a guideline on what was actually paid for the item over the previous 24 hours. It’s very important to keep this in mind as we move through the more complicated ideas for money making. The market price is a guideline to show you roughly what the item is valued at. There may be wiggle room to allow you to squeeze more profit out of your items if you know what you’re doing.
So how does pricing actually work then? It works the same as in real life: supply and demand. When there is more demand than supply, buyers will have trouble buying items and will raise their offers. If there is more supply than demand, suppliers will have trouble selling their items and will lower their prices in an attempt to sell them. In either case, the change in offer prices will show in the next day’s “Market Price” to indicate what fair price the suppliers were able to get for their items.
Trade Offers
When I say “Trade Offer” I mean either a buy or sell offer on the Grand Exchange. The moment you press “confirm” in an attempt to buy or sell is the moment that you are making an offer. The Grand Exchange prioritizes trade offers in the following way:
1. The best deal available
2. If multiple offers are for the same price, a queue system fills the oldest offer first
What does this mean for you? It means that when you make an offer “Buy 100 Coal for 200gp each” you are actually saying “Buy 100 Coal for 200gp or less each”. Everyone who uses the Grand Exchange sees this happen when you get your items and some coins back after a purchase. The same goes with selling; you are offering Coal for 200gp or more, accepting extra profit if someone is willing to pay for it.
Keep in mind when making your offers that actual prices will fluctuate heavily depending on the time of day. To make it simple, assume that the bulk of trading is done when North America is enjoying their evenings. Daytime in NA is when most trading happens, with night time having much less trading activity.
Making the Transaction
A concept not many people consider is how a transaction is actually made. In simple terms, two offers are matched and each party receives their items/coins. The implication of this is that one offer is always instantly completed and the other offer has always been waiting, even if it’s only been a few seconds. When considering item-flipping, this means that an “Instant Buy” price is the same thing as a “Non-Instant Sell” price, and “Instant Sell” is the same as “Non-Instant Buy”. This is the governing principle of item-flipping.
Trade Limits
A trade limit is the amount of items which you can buy on the GE in a 4 hour period. There is no limit on how many you can sell. This was implemented to prevent one person from being able to hoard all of the supply on a given item and manipulate their prices. There is no way to increase the trade limit in the Grand Exchange, your only option is to wait for your 4 hour period to roll over, or to buy from other players. There is no limit on player to player exchanges.
The trade limit is important to consider because it limits the amount of profit possible for a given item. The trade limit for every item is listed comprehensively on RSWikia (http://runescape.wikia.com/wiki/Grand_Exchange/Buying_limits). It is very important to note that some item limits are linked together. For example, bronze to adamant platebodies have a linked trade limit of 500, while rune platebodies have a separate limit of 100. For a list of linked limits, see this guide (http://www.smokinelite.com/t78172-known-linked-limits).
GE Updates
At the beginning of this section, I said that Market Price is a summary of the previous 24 hours of trading. This is true, but the GE updates approximately once per day and the schedule is not exact. Sometimes it is 30 hours, sometimes it is 18 hours. The market price is still an average of the previous update’s trading, but you cannot anticipate the update and invest right before it. For all practical investing it is safe to assume that the GE updates the Market Price once per day at a given time. I like to pretend that the update occurs at exactly midnight in my time zone, because I’m asleep then. In practice, it usually happens sometime during the day for me, but it isn’t something that I worry too much about. The time you select will never match up perfectly with the actual update schedule, so choose to think whatever is convenient.
Analysis Basics
Introduction
Price graphs are undoubtedly the single most important thing required for successful investing. If you only understand one thing from this entire tutorial, please let it be this topic. The graphs provided by RS are extremely simple. They provide price data on the Y-axis (vertical) and time on the X-axis (horizontal). These graphs show the daily average, and can show the 1-month, 3-month, and 6-month averages as well.
http://i.imgur.com/fLQTemD.png
Graphs can assume two basic shapes: The first is a continuous (smooth) graph and the second is what I refer to as a “step” graph. Continuous graphs are traded frequently enough that the price is updated every day with either an increase or decrease, while only occasionally having the price stay the same from one day to another. Step graphs are traded infrequently, and often go days without having a price update. For our purposes (making money) the only type we care about is continuous graphs, like the one above. This is because the price changes in step graphs are so infrequent that your profit will take a much longer time to achieve.
Trends
In price graphs, there are two basic trends which we need to be aware of. They are uptrends (or upwards trends) and downtrends (or downwards trends). The below pictures indicate these two types of trends.
Uptrend:
http://i.imgur.com/Jj7F4Mo.png
Downtrend:
http://i.imgur.com/tyGoQ72.png
When looking at trends, it is important to remember the length of the trend. An item can be going through a short term (few days) downtrend while actually enjoying a long term (weeks or months) uptrend. Always remember that no matter what direction the current trend is, the daily average is still capable of going in the opposite direction for the short term (a day or two) before returning to the trend. If you are analyzing trends, do not get caught up looking at the “trend” from one or two days. A proper medium term trend may take weeks to fully develop, try not to be fooled by one-day jumps in the opposite direction.
Basic investing theory tells us we should buy when an uptrend starts, and sell when it ends. How do we actually know when this is happening though? That’s where more advanced methods, experience, and common sense will help immensely.
Support and Resistance
This is your first “advanced” technique that will help you determine when to invest and when to dump an item. Support and resistance are imaginary lines that provide boundaries for the price of an item. The support level is the price which an item cannot drop past, and the resistance level is the price which an item cannot rise above. When a price begins dropping, it will hit the support level and begin rising again. This is when you should buy the item, because you know it will rise back up. The graph below is a simple graph I made in Excel showing the support and resistance levels for Coal over a 30 day period.
http://i.imgur.com/IGXQ93b.png
If you’re looking at the graphs and thinking “Yeah this is great, but how do I know how to draw these lines?” then you’ve discovered the one major downside of support/resistance levels. These lines are nearly completely objective, and two people could come to completely different estimates of their value. Including points from further back in time may help or make it worse for you, and this is why experience is very important. The more you practice, the better you will get at estimating support levels and hence the more money you will make from your investments. However, to get you started I’ll give a brief explanation of the theory behind drawing your own lines.
Because we want to make money, we only really care about investing in items with an uptrend. This is when support levels are useful. So find a graph with an uptrend and copy it into your favourite image editor. The key to drawing support lines is to pick a few “valleys” in your price graph and draw a line which crosses all of these lines. If there are no other “lows” which are below your line, then you’ve drawn a proper support line. If there are lows below the line you’ve drawn, your line will need to incorporate them in order to be a proper support line. The graph below shows support/resistance levels drawn in paint for Cannonballs.
http://i.imgur.com/2BaSZls.png
You’ll probably notice that sometimes there are “mini-support” levels where the price doesn’t reach the support before going back up. There are many cases where the support and resistance are not as clean as the examples that I have selected. When an item drops below its support level, you should expect the price to begin falling even further and sometimes very rapidly. If a price drops below the support level, you should look into selling the item.
Choosing Items
So far we’ve learned to buy at support levels and sell at resistance levels (or to buy on uptrends and sell on downtrends, depending on how you look at it), how do we know what items are best to practice on? The best items for your practice are items that are sold in bulk. This can be runes, ores, logs, etc. Anything that is a resource and consumed for various skills will be a good starting point. This is part of the reason why my MerchantAid uses the top 100 traded items exclusively. The other benefit of using only highly traded items is that there is no worrying about your offers taking a long time to complete. These items can be easily instant-bought and instant-sold without altering your profit margins too much.
So you have a list of items that you’d like to start merchanting. How do you know what the best items are? At this point, you’re best to try determining the support and resistance points of these items and predicting if one of the items is near its support level. You can then buy that item (or just make a mental note and come back the next day to see if the item rose or not). If the item rose after touching the support level, you’ve made a successful prediction.
There are more advanced tools which can be used to supplement these predictions and help you decide which items are best to invest in even if they aren’t at their support levels. If you’re interested in learning those, continue reading on to the next sections.
Investing Tips
As you’re starting off investing, it’s best to experiment with as many items as possible. Try to spread your wealth around so if you’ve guessed wrong you won’t lose all of your money. The rule of thumb in real life stocks is different depending on who you talk to and how risk-averse they are. My rule of thumb for RS investing is to put no more than 20% of your money into a single item. As you start out, you might find that you don’t like risking 20% of your money on an item, and you would prefer limiting it to 5%. This is perfectly acceptable, everyone has different risk preferences and you should figure out what you’re comfortable with.
It is extremely important to always be patient with investing. Market prices update once daily, so there isn’t a lot of data you can get in between updates. It also can take weeks for trends to appear, and you have to be patient through the “mini-valleys” that I spoke of earlier. Always remember to take your time and double check all offers before confirming. You can easily lose millions by having a careless mistake in an offer.
When determining support and resistance levels, keep in mind that round numbers can be support/resistance levels for the simple reason that buyers/sellers prefer round numbers when setting prices. Market psyche will cause prices to hit a limit at important round numbers (which vary depending on the price of the item).
While you have to make sure not to risk too much on a single item, it’s important to not tie up all of your cash in general as well. You want cash so you can enjoy the game, you should leave yourself whatever cushion you need in order to do that. Don’t miss out on fun because you’re waiting on Coal to reach a resistance level in a couple weeks to sell off and make a few million profit.
Finally, I’ll finish off the tips with a few business rules I’ve picked up over my years.
Never run out of cash
Cash is king
Cash now is better than (the same amount of) cash later
Never, EVER, EVER, run out of cash
Advanced Graph Reading
More Support and Resistance
The technique I will explain here is referred to as “Swing Trading” in this Smokin’ Mils tutorial (http://www.smokinelite.com/t79961-advanced-graph-reading). It involves finding a highly stable item and making many short term investments to provide stable income regardless of if the item is in an uptrend or a downtrend.
Let’s look at the graph I provided above showing coal:
http://i.imgur.com/IGXQ93b.png
We can see that in this graph, there is a very repetitive pattern of oscillations. Buying and holding onto coal from 210gp (at the lowest point) to 222gp (the highest point) is about a 5% profit. However, if you bought at every support level and sold at every resistance level you could earn about 4% per oscillation.
So if you started with 10k, you’d buy 47 coal (and have 130gp left). Then you could sell that 47 coal 3 days later for 10293 (plus 130 = 10423gp). You could wait a couple days, then buy the coal again at 211gp to get 49 coal (and 84gp) and sell for 220gp for 10864gp (including the 84gp). So instead of holding onto coal for 30 days and getting 10564gp, after the four “cycles” here, you could have 11740gp, which is 3 times more profit. The same math applies if you started with 100M, you would have 117M after a month, without having to put more than 15 minutes into investments every few days.
Advanced Graph Trends
The techniques in this tutorial come from the same Smokin’ Mils tutorial as the above section. I will summarize the important types of graph trends and their implications on GE graphs and investing.
The two easy and important trends to keep in mind are converging/diverging trends. These two trends can cause extreme price shifts and make incredible investment opportunities. The below explanation of converging trends is taken from the linked tutorial.
http://i.imgur.com/9EfwWO9.png
You can see the below graph for Babydragon Bones has a downward converging trend which is followed by a significant increase in the price once the price breaks past the resistance line. This is the “go-to” trend that you should be looking for, because once the price breaks through the resistance level, you can stand to make significant money.
http://i.imgur.com/AlTAqM4.png
The upwards converging trend is shown in the graph of Swordfish below. This is the bad converging trend, and it means that you should expect the price of the item to drop. Do not invest in these trends unless you like the risk or know when to bail.
http://i.imgur.com/z0HGh7c.png
The below explanation of diverging trends is taken from the linked tutorial:
http://i.imgur.com/FzLAGPg.png
The graph below shows the price of raw lobster over 6 months. The long-term support and resistance levels are shown as well. You can see that this is an upward diverging trend. This is the “bad” kind of diverging trend.
http://i.imgur.com/9sSfbYY.png
You can see why this would be considered the bad kind of diverging trend. Once the price crosses the support level, it takes an extreme dive. This is not the kind of trend that you typically want to invest in. The kind that you want to invest in is a downward diverging trend, shown below as the price of Luminous Energy.
http://i.imgur.com/h9FG6RT.png
Item Flipping
Introduction to Item Flipping
Item flipping is fundamentally extremely basic. It focuses exclusively on the theory I mentioned in “Making the Transaction”. There is a general spread of prices between the instant-sell (low price) and the instant-buy (high price) for an item. You stand to make good profit if you can buy at the instant-sell price and sell at the instant-buy price. The downside to this is that in order for an “instant” sell to work, there has to be a “partner” who has been waiting with an offer. In this case, you are the waiting partner.
Some items have a fast turnaround time (an hour or so) and some items have a very slow turnaround time (overnight – ie 10 hours or so). These times largely depend on the volume of the item being traded and the amount of people currently trying to flip it. High volume items (ie top 100 traded) should be expected to have high turnaround times, but they typically have lower profit margins. Items which other people are flipping will be harder for you to flip, because there are multiple “partners” waiting for trades to occur. For that reason, I will not mention any specific items in this whole tutorial. Other people on the internet are kind enough to provide item lists, but you should expect that these items will have competition. Finding items that work for your preferences and patience level is key to flipping.
Finding an Item
So I said I would not give any specific items for people to try. How are you supposed to figure out where to start then? I’ll go easy on you and say that any list you find with a Google search is probably good enough to start practicing. These lists are simply items that people have found work for them, it’s not like there’s a lot of science behind it. Grab a list, grab an item, and move on to the next step. From there you’ll find it helps to keep track of what profits you made with each item, and you’ll soon have a list of your own “favorite” items. Just go try random items, there’s always going to be some split between auto-buy and auto-sell price, you’ll find out what items give you the most profit without having to wait for a day.
How to Determine Profit
So you picked an item, now you need to know how to flip it. Let’s assume you’ve chosen Nature Runes, which are a very popular item. Put in a buy offer for 1 Nature Rune at +20% price. Keep in mind that this means “+20% or less” because you always get the best price that is below your offer. The item should auto-buy and you’ll get coins and a single item. If it doesn’t auto-buy, you should abort the offer and try again at +25% or +30% until the item finally buys. Write down the price that you bought the item for (the actual price). Below you can see that I offered to buy 1 Nature Rune for 344gp (+20%) and it actually bought for 288gp.
http://i.imgur.com/Z6rd0GK.png
Now, sell the item at -20%, which means “-20% or higher”. It should auto-sell. If not, do the same as if it didn’t auto-buy, keep decreasing the offer price until it does. Once it sells, write down the price that it sold for. Below you can see I offered to sell the Nature Rune for 231gp (-20%) and it actually sold for 286gp.
http://i.imgur.com/EoEj9bs.png
So you have two prices, and you’re almost ready to flip your Nature Runes. Keeping in mind that the GE pairs up the best deal with an auto-buy/sell, you want to make sure you have the best deal so you can quickly flip the item. You don’t need to get too feisty; you only need to be 1gp better than the original prices you found. I bought my Nature Rune for 288gp and sold it for 286gp. In order to be the best offer, I need to buy for 287gp (1gp higher than the auto-sell price) and sell for 287gp (1gp lower than the auto-buy price). This is your profit margin (for this example there is no profit margin). This is when you should decide if a flip is worth it or not. It’s completely up to you to decide if it’s worth it or not, but I usually aim for at least a 2% profit margin.
Performing the Flip
Assuming you’ve decided to flip this item, you go into the GE and make a buy offer. You cannot try to buy to the trade limit though; you’ve already traded 2 items. So you can only buy 2 less than the trade limit. Make a buy offer for the desired quantity of items at 1gp higher than your instant-sell price.
Then you wait until your offer is complete and sell your items for 1gp lower than your instant-buy price.
Congratulations, you’ve completed your flip!
Flipping Tips
Some people might look at the instructions above and say “well I’m going to offset my prices by 10gp to make it go faster”. This actually doesn’t help. You’re simply cutting the profit margin for yourself and anyone else who tries to flip the item. In terms of speed, 1gp and 100000gp off from the buy/sell prices will be the same speed, but 1gp will give you much higher profit margins.
If you find that your item has stopped buying or selling after a while, it’s likely that the item’s margins have changed. You should put in another instant buy offer to check the sell price and then sell the item to check the buy price. If these prices have shifted, you have to cancel your offer and re-buy/sell at the new prices. If you’re in the first 20-30 minutes of buying/selling though, I recommend waiting because it’s possible that the item simply isn’t traded too often. Keep in mind you could be wasting profit by trying to
Part 1 – The Basics
Updated: April 3, 2015
I have noticed that not many resources are publicly available to help people make money off the GE. In this tutorial, I hope to give you a general idea of how the RS3 Grand Exchange operates and how you can make money from it. The ideas that I discuss all directly relate to how the stock market works in real life, so this tutorial can give you some insight into stock investment as well. The information contained in this tutorial is not unique or secret and is gathered from various other sources.
In this first part of How to Dominate the Grand Exchange, I’ll lay out the basics of how the GE works, how to invest in items, and a few methods for finding good items to invest in. I’ll also explain the basics of item flipping and how to make money doing that.
Thank you to The Mayor because I stole his tutorial thread layout.
Also thank you to slacky, I would have never accomplished my MerchantAid script without his help, patience, code, and associated help. Derivatives of his code are found throughout my work, and I'd like to make a sweeping general credit because of that.
This tutorial is broken down into four main sections:
1. Grand Exchange Basics
Market Pricing
Trade Offers
Making the Transaction
Trade Limits
GE Updates
2. Grand Exchange Investing
Introduction
Trends
Support and Resistance
Choosing Items
Investing Tips
Advanced Support and Resistance
3. Advanced Graph Trends
Item Flipping
Introduction to Item Flipping
Finding an Item
How to Determine Profit
Performing the Flip
Flipping Tips
4. Technical Analysis (Part 2)
Introduction to Technical Analysis
How to Manage Data
Methods
How to Follow These Sections
Moving Averages
RSI
Aroon Indicators
Stochastic Oscillators
Bollinger Bands
Grand Exchange Basics
For many people, the Grand Exchange is simply a spot where they can dump their items after a long day of botting, or where they’ll gather their supplies before a long run of processing. I see many people who pretend the pricing works like magic which can be manipulated by sheer will power. Hopefully after a little reading you’ll have a much better idea of how pricing works in the Grand Exchange, and you’ll be 1 step closer to utter domination and piles of gold.
Market Pricing
Like many people, I hadn’t thought about what “market price” really meant until I became interested in merchanting as a money making method. When you see the term “Market Price” what you are actually seeing is the average price for the previous day’s trades. The value is simply there to give you a guideline on what was actually paid for the item over the previous 24 hours. It’s very important to keep this in mind as we move through the more complicated ideas for money making. The market price is a guideline to show you roughly what the item is valued at. There may be wiggle room to allow you to squeeze more profit out of your items if you know what you’re doing.
So how does pricing actually work then? It works the same as in real life: supply and demand. When there is more demand than supply, buyers will have trouble buying items and will raise their offers. If there is more supply than demand, suppliers will have trouble selling their items and will lower their prices in an attempt to sell them. In either case, the change in offer prices will show in the next day’s “Market Price” to indicate what fair price the suppliers were able to get for their items.
Trade Offers
When I say “Trade Offer” I mean either a buy or sell offer on the Grand Exchange. The moment you press “confirm” in an attempt to buy or sell is the moment that you are making an offer. The Grand Exchange prioritizes trade offers in the following way:
1. The best deal available
2. If multiple offers are for the same price, a queue system fills the oldest offer first
What does this mean for you? It means that when you make an offer “Buy 100 Coal for 200gp each” you are actually saying “Buy 100 Coal for 200gp or less each”. Everyone who uses the Grand Exchange sees this happen when you get your items and some coins back after a purchase. The same goes with selling; you are offering Coal for 200gp or more, accepting extra profit if someone is willing to pay for it.
Keep in mind when making your offers that actual prices will fluctuate heavily depending on the time of day. To make it simple, assume that the bulk of trading is done when North America is enjoying their evenings. Daytime in NA is when most trading happens, with night time having much less trading activity.
Making the Transaction
A concept not many people consider is how a transaction is actually made. In simple terms, two offers are matched and each party receives their items/coins. The implication of this is that one offer is always instantly completed and the other offer has always been waiting, even if it’s only been a few seconds. When considering item-flipping, this means that an “Instant Buy” price is the same thing as a “Non-Instant Sell” price, and “Instant Sell” is the same as “Non-Instant Buy”. This is the governing principle of item-flipping.
Trade Limits
A trade limit is the amount of items which you can buy on the GE in a 4 hour period. There is no limit on how many you can sell. This was implemented to prevent one person from being able to hoard all of the supply on a given item and manipulate their prices. There is no way to increase the trade limit in the Grand Exchange, your only option is to wait for your 4 hour period to roll over, or to buy from other players. There is no limit on player to player exchanges.
The trade limit is important to consider because it limits the amount of profit possible for a given item. The trade limit for every item is listed comprehensively on RSWikia (http://runescape.wikia.com/wiki/Grand_Exchange/Buying_limits). It is very important to note that some item limits are linked together. For example, bronze to adamant platebodies have a linked trade limit of 500, while rune platebodies have a separate limit of 100. For a list of linked limits, see this guide (http://www.smokinelite.com/t78172-known-linked-limits).
GE Updates
At the beginning of this section, I said that Market Price is a summary of the previous 24 hours of trading. This is true, but the GE updates approximately once per day and the schedule is not exact. Sometimes it is 30 hours, sometimes it is 18 hours. The market price is still an average of the previous update’s trading, but you cannot anticipate the update and invest right before it. For all practical investing it is safe to assume that the GE updates the Market Price once per day at a given time. I like to pretend that the update occurs at exactly midnight in my time zone, because I’m asleep then. In practice, it usually happens sometime during the day for me, but it isn’t something that I worry too much about. The time you select will never match up perfectly with the actual update schedule, so choose to think whatever is convenient.
Analysis Basics
Introduction
Price graphs are undoubtedly the single most important thing required for successful investing. If you only understand one thing from this entire tutorial, please let it be this topic. The graphs provided by RS are extremely simple. They provide price data on the Y-axis (vertical) and time on the X-axis (horizontal). These graphs show the daily average, and can show the 1-month, 3-month, and 6-month averages as well.
http://i.imgur.com/fLQTemD.png
Graphs can assume two basic shapes: The first is a continuous (smooth) graph and the second is what I refer to as a “step” graph. Continuous graphs are traded frequently enough that the price is updated every day with either an increase or decrease, while only occasionally having the price stay the same from one day to another. Step graphs are traded infrequently, and often go days without having a price update. For our purposes (making money) the only type we care about is continuous graphs, like the one above. This is because the price changes in step graphs are so infrequent that your profit will take a much longer time to achieve.
Trends
In price graphs, there are two basic trends which we need to be aware of. They are uptrends (or upwards trends) and downtrends (or downwards trends). The below pictures indicate these two types of trends.
Uptrend:
http://i.imgur.com/Jj7F4Mo.png
Downtrend:
http://i.imgur.com/tyGoQ72.png
When looking at trends, it is important to remember the length of the trend. An item can be going through a short term (few days) downtrend while actually enjoying a long term (weeks or months) uptrend. Always remember that no matter what direction the current trend is, the daily average is still capable of going in the opposite direction for the short term (a day or two) before returning to the trend. If you are analyzing trends, do not get caught up looking at the “trend” from one or two days. A proper medium term trend may take weeks to fully develop, try not to be fooled by one-day jumps in the opposite direction.
Basic investing theory tells us we should buy when an uptrend starts, and sell when it ends. How do we actually know when this is happening though? That’s where more advanced methods, experience, and common sense will help immensely.
Support and Resistance
This is your first “advanced” technique that will help you determine when to invest and when to dump an item. Support and resistance are imaginary lines that provide boundaries for the price of an item. The support level is the price which an item cannot drop past, and the resistance level is the price which an item cannot rise above. When a price begins dropping, it will hit the support level and begin rising again. This is when you should buy the item, because you know it will rise back up. The graph below is a simple graph I made in Excel showing the support and resistance levels for Coal over a 30 day period.
http://i.imgur.com/IGXQ93b.png
If you’re looking at the graphs and thinking “Yeah this is great, but how do I know how to draw these lines?” then you’ve discovered the one major downside of support/resistance levels. These lines are nearly completely objective, and two people could come to completely different estimates of their value. Including points from further back in time may help or make it worse for you, and this is why experience is very important. The more you practice, the better you will get at estimating support levels and hence the more money you will make from your investments. However, to get you started I’ll give a brief explanation of the theory behind drawing your own lines.
Because we want to make money, we only really care about investing in items with an uptrend. This is when support levels are useful. So find a graph with an uptrend and copy it into your favourite image editor. The key to drawing support lines is to pick a few “valleys” in your price graph and draw a line which crosses all of these lines. If there are no other “lows” which are below your line, then you’ve drawn a proper support line. If there are lows below the line you’ve drawn, your line will need to incorporate them in order to be a proper support line. The graph below shows support/resistance levels drawn in paint for Cannonballs.
http://i.imgur.com/2BaSZls.png
You’ll probably notice that sometimes there are “mini-support” levels where the price doesn’t reach the support before going back up. There are many cases where the support and resistance are not as clean as the examples that I have selected. When an item drops below its support level, you should expect the price to begin falling even further and sometimes very rapidly. If a price drops below the support level, you should look into selling the item.
Choosing Items
So far we’ve learned to buy at support levels and sell at resistance levels (or to buy on uptrends and sell on downtrends, depending on how you look at it), how do we know what items are best to practice on? The best items for your practice are items that are sold in bulk. This can be runes, ores, logs, etc. Anything that is a resource and consumed for various skills will be a good starting point. This is part of the reason why my MerchantAid uses the top 100 traded items exclusively. The other benefit of using only highly traded items is that there is no worrying about your offers taking a long time to complete. These items can be easily instant-bought and instant-sold without altering your profit margins too much.
So you have a list of items that you’d like to start merchanting. How do you know what the best items are? At this point, you’re best to try determining the support and resistance points of these items and predicting if one of the items is near its support level. You can then buy that item (or just make a mental note and come back the next day to see if the item rose or not). If the item rose after touching the support level, you’ve made a successful prediction.
There are more advanced tools which can be used to supplement these predictions and help you decide which items are best to invest in even if they aren’t at their support levels. If you’re interested in learning those, continue reading on to the next sections.
Investing Tips
As you’re starting off investing, it’s best to experiment with as many items as possible. Try to spread your wealth around so if you’ve guessed wrong you won’t lose all of your money. The rule of thumb in real life stocks is different depending on who you talk to and how risk-averse they are. My rule of thumb for RS investing is to put no more than 20% of your money into a single item. As you start out, you might find that you don’t like risking 20% of your money on an item, and you would prefer limiting it to 5%. This is perfectly acceptable, everyone has different risk preferences and you should figure out what you’re comfortable with.
It is extremely important to always be patient with investing. Market prices update once daily, so there isn’t a lot of data you can get in between updates. It also can take weeks for trends to appear, and you have to be patient through the “mini-valleys” that I spoke of earlier. Always remember to take your time and double check all offers before confirming. You can easily lose millions by having a careless mistake in an offer.
When determining support and resistance levels, keep in mind that round numbers can be support/resistance levels for the simple reason that buyers/sellers prefer round numbers when setting prices. Market psyche will cause prices to hit a limit at important round numbers (which vary depending on the price of the item).
While you have to make sure not to risk too much on a single item, it’s important to not tie up all of your cash in general as well. You want cash so you can enjoy the game, you should leave yourself whatever cushion you need in order to do that. Don’t miss out on fun because you’re waiting on Coal to reach a resistance level in a couple weeks to sell off and make a few million profit.
Finally, I’ll finish off the tips with a few business rules I’ve picked up over my years.
Never run out of cash
Cash is king
Cash now is better than (the same amount of) cash later
Never, EVER, EVER, run out of cash
Advanced Graph Reading
More Support and Resistance
The technique I will explain here is referred to as “Swing Trading” in this Smokin’ Mils tutorial (http://www.smokinelite.com/t79961-advanced-graph-reading). It involves finding a highly stable item and making many short term investments to provide stable income regardless of if the item is in an uptrend or a downtrend.
Let’s look at the graph I provided above showing coal:
http://i.imgur.com/IGXQ93b.png
We can see that in this graph, there is a very repetitive pattern of oscillations. Buying and holding onto coal from 210gp (at the lowest point) to 222gp (the highest point) is about a 5% profit. However, if you bought at every support level and sold at every resistance level you could earn about 4% per oscillation.
So if you started with 10k, you’d buy 47 coal (and have 130gp left). Then you could sell that 47 coal 3 days later for 10293 (plus 130 = 10423gp). You could wait a couple days, then buy the coal again at 211gp to get 49 coal (and 84gp) and sell for 220gp for 10864gp (including the 84gp). So instead of holding onto coal for 30 days and getting 10564gp, after the four “cycles” here, you could have 11740gp, which is 3 times more profit. The same math applies if you started with 100M, you would have 117M after a month, without having to put more than 15 minutes into investments every few days.
Advanced Graph Trends
The techniques in this tutorial come from the same Smokin’ Mils tutorial as the above section. I will summarize the important types of graph trends and their implications on GE graphs and investing.
The two easy and important trends to keep in mind are converging/diverging trends. These two trends can cause extreme price shifts and make incredible investment opportunities. The below explanation of converging trends is taken from the linked tutorial.
http://i.imgur.com/9EfwWO9.png
You can see the below graph for Babydragon Bones has a downward converging trend which is followed by a significant increase in the price once the price breaks past the resistance line. This is the “go-to” trend that you should be looking for, because once the price breaks through the resistance level, you can stand to make significant money.
http://i.imgur.com/AlTAqM4.png
The upwards converging trend is shown in the graph of Swordfish below. This is the bad converging trend, and it means that you should expect the price of the item to drop. Do not invest in these trends unless you like the risk or know when to bail.
http://i.imgur.com/z0HGh7c.png
The below explanation of diverging trends is taken from the linked tutorial:
http://i.imgur.com/FzLAGPg.png
The graph below shows the price of raw lobster over 6 months. The long-term support and resistance levels are shown as well. You can see that this is an upward diverging trend. This is the “bad” kind of diverging trend.
http://i.imgur.com/9sSfbYY.png
You can see why this would be considered the bad kind of diverging trend. Once the price crosses the support level, it takes an extreme dive. This is not the kind of trend that you typically want to invest in. The kind that you want to invest in is a downward diverging trend, shown below as the price of Luminous Energy.
http://i.imgur.com/h9FG6RT.png
Item Flipping
Introduction to Item Flipping
Item flipping is fundamentally extremely basic. It focuses exclusively on the theory I mentioned in “Making the Transaction”. There is a general spread of prices between the instant-sell (low price) and the instant-buy (high price) for an item. You stand to make good profit if you can buy at the instant-sell price and sell at the instant-buy price. The downside to this is that in order for an “instant” sell to work, there has to be a “partner” who has been waiting with an offer. In this case, you are the waiting partner.
Some items have a fast turnaround time (an hour or so) and some items have a very slow turnaround time (overnight – ie 10 hours or so). These times largely depend on the volume of the item being traded and the amount of people currently trying to flip it. High volume items (ie top 100 traded) should be expected to have high turnaround times, but they typically have lower profit margins. Items which other people are flipping will be harder for you to flip, because there are multiple “partners” waiting for trades to occur. For that reason, I will not mention any specific items in this whole tutorial. Other people on the internet are kind enough to provide item lists, but you should expect that these items will have competition. Finding items that work for your preferences and patience level is key to flipping.
Finding an Item
So I said I would not give any specific items for people to try. How are you supposed to figure out where to start then? I’ll go easy on you and say that any list you find with a Google search is probably good enough to start practicing. These lists are simply items that people have found work for them, it’s not like there’s a lot of science behind it. Grab a list, grab an item, and move on to the next step. From there you’ll find it helps to keep track of what profits you made with each item, and you’ll soon have a list of your own “favorite” items. Just go try random items, there’s always going to be some split between auto-buy and auto-sell price, you’ll find out what items give you the most profit without having to wait for a day.
How to Determine Profit
So you picked an item, now you need to know how to flip it. Let’s assume you’ve chosen Nature Runes, which are a very popular item. Put in a buy offer for 1 Nature Rune at +20% price. Keep in mind that this means “+20% or less” because you always get the best price that is below your offer. The item should auto-buy and you’ll get coins and a single item. If it doesn’t auto-buy, you should abort the offer and try again at +25% or +30% until the item finally buys. Write down the price that you bought the item for (the actual price). Below you can see that I offered to buy 1 Nature Rune for 344gp (+20%) and it actually bought for 288gp.
http://i.imgur.com/Z6rd0GK.png
Now, sell the item at -20%, which means “-20% or higher”. It should auto-sell. If not, do the same as if it didn’t auto-buy, keep decreasing the offer price until it does. Once it sells, write down the price that it sold for. Below you can see I offered to sell the Nature Rune for 231gp (-20%) and it actually sold for 286gp.
http://i.imgur.com/EoEj9bs.png
So you have two prices, and you’re almost ready to flip your Nature Runes. Keeping in mind that the GE pairs up the best deal with an auto-buy/sell, you want to make sure you have the best deal so you can quickly flip the item. You don’t need to get too feisty; you only need to be 1gp better than the original prices you found. I bought my Nature Rune for 288gp and sold it for 286gp. In order to be the best offer, I need to buy for 287gp (1gp higher than the auto-sell price) and sell for 287gp (1gp lower than the auto-buy price). This is your profit margin (for this example there is no profit margin). This is when you should decide if a flip is worth it or not. It’s completely up to you to decide if it’s worth it or not, but I usually aim for at least a 2% profit margin.
Performing the Flip
Assuming you’ve decided to flip this item, you go into the GE and make a buy offer. You cannot try to buy to the trade limit though; you’ve already traded 2 items. So you can only buy 2 less than the trade limit. Make a buy offer for the desired quantity of items at 1gp higher than your instant-sell price.
Then you wait until your offer is complete and sell your items for 1gp lower than your instant-buy price.
Congratulations, you’ve completed your flip!
Flipping Tips
Some people might look at the instructions above and say “well I’m going to offset my prices by 10gp to make it go faster”. This actually doesn’t help. You’re simply cutting the profit margin for yourself and anyone else who tries to flip the item. In terms of speed, 1gp and 100000gp off from the buy/sell prices will be the same speed, but 1gp will give you much higher profit margins.
If you find that your item has stopped buying or selling after a while, it’s likely that the item’s margins have changed. You should put in another instant buy offer to check the sell price and then sell the item to check the buy price. If these prices have shifted, you have to cancel your offer and re-buy/sell at the new prices. If you’re in the first 20-30 minutes of buying/selling though, I recommend waiting because it’s possible that the item simply isn’t traded too often. Keep in mind you could be wasting profit by trying to