My AH Method (old)

There are two methods of profiting from other players using the AH. Business profit and work profit. Business Profit involves taking advantage of mistakes other people make. It's essentially what drives the buy low/sell high mechanic--person A posts for below the market price, you buy that and repost above market price. Person B buys your overpriced repost. If the market price of item X is 10g, you bought at 5g, and sold at 15g: you made 10g business profit. Work Profit involves providing a service generally inaccessible or inconvenient to other players. They're willing to pay a premium because it saves them time. The person trades his gold for your time--the method works because as the producer, your time spent can be much more efficiently spent producing items in bulk compared to finding someone to craft a single item at a time. This is the aspect I focus on. Let's take Sapphire Spellthread as an example. It's a leg armor kit produced by tailoring. Its materials are 4 Eternal Fires, 4 Iceweb Spider Silks, and 1 Frozen Orb. The first thing I do is calculate a material cost. This is based on the MAXIMUM value I'm willing to pay for the raw reagents. In this case, my snatch list has Eternal Fire at 25g, Iceweb Spider Silk at 5g, and Frozen Orbs at 20g. So my material cost is (25*4)+(5*4)+20 = 140g. The next thing I do is decide the minimum amount of profit I'm willing to accept for creating this item. This is essentially the price I'm setting on the time it took to find and buy the items, craft it, and repost it until sale. You can make profits even setting the price 5g over mats, but that's a terrible price to put on your time for this item. Let's say I want 30g profit. This means the minimum post price for me will be 140g (mats) +30g (profit) = 170g. I actually factor in the AH cut (5%) and 1 deposit fee when I consider profits, but that's not necessary to describe the concept. So I set my snatch list to buy those mats for the max I'm willing to pay, then I set quick auctions with a threshhold price of 170g. This means I'm guaranteed 30g profit every time one of these sells. Now Quick Auctions also has a fallback price, a price you won't post above. You can set it as high as you'd like, but I'd consider a reasonable price so it will move even if no one else posts. I set it at 215g. Best case scenario, I'll make 215-140=75g profit on this transaction. What if the mats are cheaper than my max buy cost? Then I consider the difference to be business profit. I bought the items at a discount, then "sold them to myself" immediately, pocketing the difference. This is important because the price of mats varies widely across time, and in your inventory, you might have X Fires purchased at 10g per, Y Fires Purchased at 15g per, and Z Fires purchased at 25g per. Unless you're an extraordinary recordkeeper, there's no way of distinguishing them and you'll lose money if you set your profit margin according to the 15g fires and end up using the 25g fires. This method very crudely responds to the market situation. If mats are plentiful, many people see there is profit to be made on the item and craft it, then prices drop as they undercut one another. Your profits will drop toward your minimum profit per transaction, but you'll make it up in volume. When mats are sparse, the price of mats rises and people can't afford to invest the money to craft the items, so there's less competition with similar demand--your prices will rise to your fallback value. You sell less, but make more gold per transaction. If you watch the market like a hawk, you can be much more efficient about responding to changes. I prefer this method because I dabble in so many markets, so keeping up on all of them is difficult and this is pretty much dumbfire. But, what if people are stupid and post for less than cost of mats / ridiculously low profit margins? That's what the threshhold (will not post below) is for. Don't bother buying them out unless it's near or below your material cost--it will just encourage them to craft more and there may not be enough demand to move your product and theirs. Instead, just let them sell themselves out. You won't post any product during this time thanks to QA2, but conversely, you don't have to do any work--you're not moving product, therefore you're not obliged to craft more. Because this happens a LOT, I make up for it by diversifying into different markets. Some markets will tank temporarily when stupids infest it, and I don't spend time on those until they leave. Meanwhile, other markets will be profitable and I'll work in those. It's more or less a "pull" system where you restock products as they sell, and therefore concentrate your work on what's actually moving. This also means at any given time, you end up with a significant portion of your wealth as product. Because mat prices go in cycles (Iceweb goes from 4-15g per, for example) I tend to buy as much as I can in low points and use that to ride out high points. Part of the reason I don't do much "buy low, sell high" is because I have little skill with it. The other part is I end up selling most of those buy low items to myself and passing that item through production to make further profit through work. I use an excel spreadsheet to calculate profits. You can do it by hand, but the problem is sometimes the market changes. When that happens, I can just enter the new value of mats to see if I can buy higher and it will automatically calculate my new profit margin. You need to adjust your prices as the market shifts. Raising and lowering the snatch value influences how much raw material you can acquire. Higher values get you more material at the cost of profit. Altering the threshhold price influences how often you will post your product. Lower means you post more, means you make more sales, but again, at the cost of profit. This is the part where knowing the market helps--you can tweak it in response to supply and demand of both materials and product