‘Bid’ and ‘Ask’ and a Day in the Life of a Wall Street Trader

She arrives early, maybe after a quick workout or a cup of coffee, but always with enough time to get a feel for the markets before they open. She skims the financial papers and the news wires and listens to internal reports from her firm on expected market movements for the day. By the time the trading bell rings, indicating markets are now open for trading, she’s already got a feel for the pace of the day and a plan of action as to how to achieve profit. Some of her peers will be trading for the long term; others will be looking for a quick turnaround. She has a plan in mind herself, and will work towards that purpose all day. She quits the day early, soon after the markets have closed, but her mind is constantly racing as to how to improve her game. For trading is a mindset, not just a form of employment, and goes well beyond the boundaries of nine to five.

Wall Street is obviously a very different game than WoW. But it is, indeed, a game nonetheless, and it is in this overlap that we can learn a few things that might apply to building riches in World of Warcraft.

There are many, many different types of traders, all in different markets and with varying approaches towards reaching their profit goals. And, less we come off as ethnocentric, it should also be mentioned that the vast majority of the world’s traders don’t actually work on Wall Street, but in one of the many other trading hubs throughout the world. However, regardless of where a trader conducts their business- be it their bedroom or Broadway- there are certain tools and terms that remain consistent to all players in the game. And here again we see some overlap with WoW.

At the heart of these trading rules is the bid/ask system. It is with these simple terms that a trader can set the parameters by which they think they can profit. Put simply, a bid is the amount for wish a buyer is willing to pay for an asset. The ask price is the amount the seller will sell it for. Both terms are in absolutes meaning that the bid price is the maximum price the buyer will pay and the ask price the minimum equivalent on the seller’s side. The difference between the two is called the spread. We’ll summarize quickly here:

Bid– Maximum amount you are willing to pay for an item.
Ask– Minimum amount you are willing to sell an item for.
Spread– The difference between the bid and the asking price.

When first you log in to do your daily WoW trading, get a feel for the market(s) that you’re involved in (or wish to be involved in), and decide on a limit in price (a bid) that you’re willing to pay for the items in this market. As you’re doing so, also decide your selling (or asking) price. You should, of course, be both a buyer and a seller in WoW at all times. You may not do both every day, but by having a set price in mind for each end of the trading equation, you can always generate profit, even when prices are moving downwards. This is a much more effective means of trading items because, just as on Wall Street, it removes all emotion from your trading and thus increases your profit potential. When you just “look for good deals” or “buy it when you want it” you may make choices based on your emotions, instead of logical and profitable decisions. Put another way, your ‘wants’ and what ‘looks good’ can change day-to-day and minute-to-minute even but, by deciding on pre-set bid/ask amounts, all emotion is removed. It either meets your criteria or it doesn’t. This is also another example of an area in which a tool like Auctioneer can help you trade profitably.

Having decided on your bid amount, you simply buy out any items priced below this threshold and bid on any others that have bid prices below the threshold. Alternatively, if the markets are up, place the items you wish to sell for your on the AH for your asking price. If you set your AH bid amount different than your buyout amount (which we don’t advise) then the bid amount of the item should be your ask price. Otherwise your ask price is the amount for which you set AH auction to bid/buyout.

Just be sure that your spread covers the amount of the auction house cut and every sale you make will be profitable. The only real trick then, is deciding on realistic levels of bid and ask. Of course we all want to sell items for twice as much as we bought them for (or more) but this is unrealistic, and the goal is to actually sell the items while the market is high, not to keep losing money on AH deposit fees. Items with no deposit fee are exempt from this and may be placed on the AH with a bit more of a longer term outlook if you wish.

By way of example, let’s talk about Titansteel bars. We select this item because we have heard from many readers that they have been ‘stocking up’ in anticipation of patch 3.1 and they want to know when the price is going to rise and it will be time to sell. Well, to that we say, “When you say stocking up, what was the cost of either creating or purchasing the bars?” Often the response is between 70 and 80 gold. We next want to know what the fair price (or average ask price in Wall St. terms) of the bars is on their server at the moment. The common answer is in the mid nineties. So the answer as to when to sell is then ‘now’. If you can make 15 to 25 gold on a single item, and you have a bunch of them stocked up, then sell. It is more profitable to continue producing or buying the bars at 75 gold and reselling them for a modest profit than it is to hold them all and wait for ‘the perfect time’. Or, in the words of the English essayist Samuel Johnson, “Nothing will ever be attempted if all possible objections must first be overcome.” So, sell when you can make a profit and stop waiting for that perfect time that may never come. Remember that WoW, like Wall Street, is a long-term game and the goal of the profiteer is to build wealth steadily and consistently, not in a single day. Yes, there will be times when the market will be higher than you recently sold for, or lower than what you bought an item for, but so long as you do your research, the steady income beats out the big sale any day.

As we sign off, let’s go back to our Wall Street trader for a moment. Her title is more descriptive then it initially suggests. She is, indeed, trading her assets. At times she is a seller (when the market is high) and other times she is a buyer (when the price is right). There is actually very little skill involved beyond knowing how to set her bid and ask limits based on the information at hand and adhering to this regime without the impediment of emotion. See if you can’t muster a bit of this same mentality in your WoW trading and be sure to let us know how this approach works for you.

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13 Comments

Filed under WoW Gold Making Tips, WoW Market Commentary

13 responses to “‘Bid’ and ‘Ask’ and a Day in the Life of a Wall Street Trader

  1. Bids

    By way of example, could you perhaps share your thoughts on the Undeath Deck, and it’s Ace – 8? I know a lot of people stocked up on this little “gem” and are waiting on the right time. Problem is, the prices have stagnated. Is it time to hop out of this niche, or just wait it out? Thanks for reading.

  2. Aro

    I use no mods other than the Recount dps meter and Omen. Instead of using Auctioneer, I simply shift-click whatever item is in my inventory that I want to sell and find all similar items. I figure out what I’m willing to sell for, and if there’s a glut on the market causing the price to go below my Ask, I just hold on to it.

    Optimally, I want to be in professions where I don’t have to gather anything at all. I buy one thing, make it into another thing, and sell for a profit. The only two professions I’ve been able to do this with have been Alchemy (Transmutations) and Jewelcrafting, but Gems were tough. Depending on the gem and the cut, some of them had a lower turnover, leading to a long drawn out game of undercutting that would sometimes go a week, losing me 30-40g.

    Given my tactics (laziness), I wonder if you guys have any suggestions for me about what professions to take?

  3. Aro

    I wanted to add that even though you may not advise setting the bid below the buyout, I have found that having a lower bid price is very effective at getting your item at or near the top of the list for the same item. This ends up acting almost like an advertising cost, since a lot of people take for granted that the top of the list is always the cheapest, and they just click buyout anyway.

  4. jederus

    @ Bids, I dunno… I’m making some G off the death deck myself although I’m not a scribe. I simply buy them and reprice them. It’s a pretty small market so it is also easily dominated if that’s your thing. As far as my own techniques go, my bid on that deck is currently 700gold and my ask is about 900 (depending on amount of competition). So I make about 150 (after paying the AH fees) when they sell. I’ve done this on 3 different servers and it usually works. If you paid more for the deck, yes, I’d say you should get out and cut your losses. If you paid less, go ahead and sell it and, as mentioned in the post above, stop waiting for the ‘best’ time. As to whether or not it will rise further in price, our team suspects that it will as more people realize the buff to the item that occurred in 3.1 but do not expect a huge increase… say perhaps 15-20% from current going rate.

    Our resident inscription expert also makes gold off of the decks because the materials are fairly cheap for the cards themselves. Provided he never gets antsy and purchases a card in a rush to complete a deck, he simply waits until he completes a deck and puts it in the AH. He adds that, while he’s got a bank toon filled with cards because of this strategy, he does this with ALL decks and ALWAYS profits. That said, it’s common knowledge around these parts that ‘he’s not playing with a full deck’ if you get my drift.

    @Aro… I like your style 🙂 Lazy trade is fine. With the buy low, transmute, sell high strategy you can make a decent profit with minimal investment. This is a part of my own personal strategy for profit as well. While transmute mastery is somewhat lacking (not just QQing here but Blizzard has said the same) it can still be quite profitable. Personally, I like to exploit the entire value chain… here’s an example:

    I scan the AH regularly for deals on Frostweave cloth and the related value chain items all the way up to the highest-end cloth. Thus, if frostweave is valued low, but Frostwave bolts are valued higher than the cost to of the mats, I turn them into bolts and sell. If Imbued Frostweave bolts are the high price of the day, and I have access to inexpensive Infinite Dust, I sell at that level. Sometimes, all of these items are undervalued and I will buy the items along the chain that meet my bid threshold for resale or transmute. At the top of the chain are the three high-end cloths and various epic items. I will only post an epic tailored item in there is NO OTHER of it on the AH at the time. That said, I’ll always have one of most epics up for sale at any given time… Even if they’re over priced. The only times I won’t list an item is when the material cost is more than the crafted item cost or when there’s another one already on the market. I’ve found that by being open to selling anywhere along the chain I can make vast amounts of gold just exploiting the supply and demand shifts. Some days I’m reselling Frostweave cloth for a few gold profit. Other days I’m selling Moonshroud or Ebonweave (In my experience Spellweave is rarely worth the transmute as a key material cost is Eternal Fire, the highest priced Eternal). Some days it is simply a matter of not selling anything and being a buyer because prices are depressed. Of course, this is just one of the many ways that I generate gold so there are also days that I don’t do anything at all with this skill or market other than looking for under priced materials.

    I think the keys to profitability with all AH management strategies are thus: flexibility, patience, and knowledge of the market. I’ve seen many blogs lately complaining that “the market is crashing” or “I can’t make money doing X anymore”. Both of these complaints strike me as either impatient or inflexible. Simple understand, adapt and overcome. Further, if someone has time to complain about not making money they have time to apply that same effort towards making money. And complaining simply isn’t profitable. But I digress….

    As far as your specific case, our favorite alchemy transmute value is Eternal Life to Eternal Fire. Our resident alchemist makes a decent amount of gold just performing this transmute daily and he’s not even a transmute master. It’s just one way he makes money using his skills since it is simple math that the fire sells for 4X the amount of the life equivalent. I asked him and he suggests that I also tell you about developing a partnership with a Jewelcrafter and a Tailor or Blacksmith as the Eternals are key components of several crafted items. He particularly likes turning a few cheap green gems and an extra eternal or two into a raw meta-gem and then having the JC turn these into a highly profitable cut meta-gem.

    As far as the bid/buyout thing goes, we say go ahead and do it your way. We only present our case as the ‘best practice’ but certainly don’t want to come off as though it is the only way to make gold. In fact, if everyone actually did it the way we suggested we’d have no items left that are below our bid threshold and it would be more difficult to make gold since we could no longer scoop up and reprice these items.

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  13. seo

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