Getting started, Merchanting basics.

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Getting started, Merchanting basics.

Post by kirito on Sun Dec 20, 2015 1:20 am

What is merchanting?

Merchanting:  is the act of purchasing an item at a low price and then selling that item at a higher price to generate profit.
It is a popular method used by wealthy players to make money. Merchanting became much less common after the addition of the Grand Exchange. With the addition of the Grand Exchange, it is no longer simple for merchants to act as an intermediary between players who seek to easily sell and players who seek to easily buy — the Grand Exchange replaced this.

How the grand exchange works.

Understanding the Grand Exchange is important to Merchanting.

If an offer is placed in the Grand Exchange, the game will search for all offers meeting your price or better, and instantly completes those trades, using the price of the already existing offer. If an offer is not instantly completed, it will remain until a matching offer is entered or it is cancelled. Thus, all trades occurring in the Grand Exchange occur instantly for one person and not instantly for the other. This is similar to the way many markets including the stock market of forex market work. Bellow is a stock market graph to help u visualize the way orders are prioritized. These orders in the example will be filled from top to bottom.



Most items have a maximum quantity that can be bought every four hours. This limit was implemented by Jagex to prevent price manipulation. A full list of the maximum purchases can be seen here.

A common misconception about the Grand Exchange is attaching special meaning to the guide price. In reality, the guide price is the average price of yesterday's trades (provided that it is not more than 5% different from yesterday's guide price) and may no longer be relevant.

In general, items are always rising in price or falling in price. If an item is rising in price, an attempt to sell it for guide price will be instantly completed, and an attempt to buy for the guide price will not be instantly completed. The opposite is true for items falling in price.

Finding an items prices.

Without knowing an items buying and selling prices it would be incredibly difficult to flip items. The easiest method of doing this is simply buying and selling one of those items. To determine the market value of an item in the Grand Exchange. The price at which an item is trading for in the Grand Exchange may differ slightly or even greatly from the guide price. In order to determine the market value of an item, we first put in a buy offer for one quantity of it at considerably above the guide price. The amount that it buys for is the instant-buy price (high end of the price range). Next, we offer to sell that one quantity of the item for considerably below the guide price. The amount that it sells for is the instant-sell price (low end of the price range). So, if you bought the item for 135 coins and sold it for 130 coins, then its market value is anywhere between 130 coins and 135 coins.(visual example below)



Price cutting & up bidding

Price cutting: selling a flipped item for less than the margin, this makes it appear to merchants who are currently price checking that the margin is smaller and they will follow your sell offer. This seems like a small issue but there are often many merchants and this lowers the sell price surprisingly fast.
Up bidding: placing a higher buying offer than the current margin, like price cutting this closes the gap on the two prices reducing profit and fooling the current price checkers.
These tactics are used by players who are not patient and try to fill there orders faster than other merchants. This destroys the margins and ends up loosing everyone money when they have to adjust there prices or find new items. No true merchant should be doing this it is a novice tactic and if you cant be patient you should not be merchanting.

Flipping.

Flipping in my opinion is the most basic of all the merchanting methods. Flipping involves buying an item for as little as possible and then selling for as much as possible within a few hours. Flipping is unique in that it can be used to profit from any item, regardless of its price trend. Flipping is only recommended for players with plenty of starting cash (10M at least) to do it, as not doing so will result in low profits.

If you buy an item and find that a major crash has started and you cannot sell at a high price, you can either hang on to it until the price rises again, or dump it at a low price. If you choose your items carefully, this shouldn't happen very often. If you are trying new items or are unsure of an item, do a test buy of a small quantity, and then resell to see how quickly the item moves. If you can buy ten easily, then sell ten easily, next time try to buy 50/sell 50, then try to buy 250/sell 250. Never start out buying a huge quantity of an item you are uncertain of. Do not let this discourage you there are plenty of items that i would be confident to tell you 99.99% safe if flipped short term. Obviously you cant ever tell for certain what the price will do in the future.

An example of a successful flip, keep in mind this one item took less than 2 minutes.



Your first flips

Here is a list of questions to help keep you on track with those 99.99% safe items.

  • Items farmed in bulk and used in bulk. (often for training)
  • Items that have crashed most commonly due to bots. (dragon bones or hides)
  • Items you can get below high alch value. (some rune or dragon items, battle staffs. 100% safe)
  • Items that do not re-enter the market. (consumables)


And a list of safe starter items to help get your feet wet.

  • runes, arrows, or other ammo.
  • foods and potions
  • herbs, bone, or ashes
  • potions, logs and hides


Thank you for taking the time to read this topic, I really appreciate feedback in order to be capable of producing the best material possible. I hope you find this useful and i wish you guys the best of luck. Smile
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kirito
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