How To Guide On Being A Merchant (What Buy Low/Sell High Means)
I have often seen people told to "buy low, sell high" in order to become "Rich". Other than that there is not usually any additional advice on how this is done. I thought I would take some time to perhaps share some insight. This is not the only method of buying low and selling high. Its just one way, a starting point for people that do not know where to start.
Step One: Observe Peak Prices/Bottom Out Prices
What this means is that you need to take a day to monitor the price of items periodically throughout the entire day. Then purchase those items at a very specific price point during a low period.
For example, imagine item (X) peak price is 13,500g. Now factor is the CS fee of 725g this means you actually net 12,725g. So buying "Low" is anything below 12,725g as that would be the starting point of calculating profit margins and selling "High" is anything above that baseline.
Now you could sit all day in front of the CS hitting "refresh" to monitor those low points and buy up all the items. BUT you might actually be loosing profit since if you spend 2 hours monitoring price fluctuations and only make (X) it might have been more profitable to spend that same amount of time farming. HOWEVER if you are in need of the appropriate gear to farm and lack the finances required this method is ideal.
Step Two: Diversify
Your "Stash" and "Mule Toons" should be like an investment portfolio. No financial advisor would ever suggest to go 100% with a specific type of investment and neither should you. The AL market reflects much the same as any market. There are high risk/returns, medium risk/return and Low risk/return investments. The key is having a mixture of them all at an appropriate level. Heres the breakdown:
If you know that you have a big project IRL that you need to focus on or family is starting to feel you are online too much and need to cut back playtime; your investment portfolio should be much more heavily weighted on "Blue Chip" type investments such as Vanities, High End Eggs, Discontinued Items, Etc. These are investments which will 99% of the time hold their value and appreciate slowly over the course of time. Don't invest a large amount of gold on vanities and expect a huge return the next week. But you may do so knowing that they will be worth the same amount if not more when you get back to playing AL more actively.
The opposite is true if you know that you will be playing actively and can monitor prices. Your portfolio should then be weighted heavily on high risk/return items. Your High risk/return items would be Locks, Elixirs, Mythic/Arcane, etc. Basically things that go up and down in big swings frequently.
The reason these are High risk return items is that at any moment in time STS could make an announcement which would DRASTICALLY effect the prices of these items. MANY Merchants make the mistake of ONLY dealing in Mythic/Arcane items or a specific type of item. I personally would not advise this method as your then stacking your portfolio too much in one type of investment and if it bottoms out your up the creek without a paddle.
Medium risk investments would be elite legendary gear. Their acquisition is somewhat difficult and requires work to be put into it so the market is not saturated with them (Unlike crate gear). Keep in mind though their price will ALWAYS depreciate over time but if you purchase a high end legendary piece for 300K with PATIENCE you can usually find a buyer who will pay 325K. Which would be a medium size return. The KEY is patience.
Instead try breaking it down into percentage.
Example: I personally plan on being active these next few months so my portfolio is as such (70%High, 10% Medium, 20% Low)
Now here is the thing about those "Low Risk" investments. IF an opportunity presents itself (usually due to an STS announcement) that a "High Risk" item might yield big returns in the near future. You can sell your "Low Risk" item and purchase additional "High Risk" items. Because of the very nature of "Low Risk" items you can usually buy BACK the item for about the same price it was sold (If done so within a reasonable timeframe). As their value does not fluctuate the same way "High Risk" items values do.
An example: If I think "X" prices will go up I might sell a "Steel Commando". The (X) prices, IF they go up would only do so for a few days. In that time frame my "Steel Commando" will still be about the same price after (X) prices go back down. I will then buy back my "Steel Commando" and set aside the profits made if my theory was correct on item (X).
Step 3: Know How Much You Have
Get a spread sheet and write down every item in your stash/alts. Then write down their lowest possible value and highest value. That way you always know what you have if needed. Update this list frequently. Just as you should always know what your net worth is IRL so should you in the virtual world too.
Step 4: Ask Advice From Experienced Players
Experienced longtime players have an advantage over everyone else. They are WISE. They have seen this game progress and know the trends. Advice is one of those things thats usually freely given but could be worth a fortune. I have leaned heavily on the advice given by senior members in my Guild and friends outside of it. It has proven to be priceless.
Step 5: Measure The Ripple Effect and Plan For It
This is the key "Speculation" and why Step 4 is SO important. Every change or adjustment that STS makes WILL effect the market. This is how theories on what prices will go up and which will go down are formulated. If anyone is an avid chess player its pretty easy to grasp the concept of "speculation."
Here is an example of what I mean:
STS Announces they will "Fix" the DMG% to stack properly. By increasing the DMG output of players what will this do to elites? What effect will this have on farming? How will those items being farmed and the items required to effectively farm be effected?
Once you can start answering these questions more accurately than inaccurately you will be a TRUE "Merchant". Don't be discouraged when you are wrong sometimes EVERYONE is wrong sometimes. Just strive to be right more often and understand you have learned something new with each mistake. What NOT to do in the future.
**Side Note**
You should absolutely never, have more in liquid cash than you do investments. That is akin to taking all your money and putting it into a savings account!! Any individual who has become financially independent will tell you that is an absolute mistake. A market, is a market, be it real or virtual and the same laws apply.
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