The Ultimate Grand Exchange Investing Guide

[MerchantInTheDark]

Hey Tip.It,

 

Here is the new and upgraded version of my Ultimate Grand Exchange Investing Guide, originally located at www.rune-tips.net/ExchangeInvesting. I am the original author of this guide, so don't worry about it being ripped.

 

This is a rather long guide, and I have done my best to include all of the original images and formatting although this being a forum I can't reproduce it exactly. Enjoy!

 

~MITD

 

 

Chapter One - What Is Investing?

 

What Is Investing?

 

Investing has always existed in some way in RuneScape, although many players have conflicting ideas on what it is. Some deem investing to be the same as old-style merchanting, while others quote vague rumours about "amulets of glory" or "barrows sets".

 

The truth is that RuneScape investing is almost exactly like the real-life stock market. Shares (or in this case, items), are bought by the investor and held before being re-sold at a later time, hopefully for a profit. Investors in real life and in RuneScape use common sense and experience to decide what items to buy, when to buy them, and when to sell in order to turn over the most profit.

 

Why has the Grand Exchange made investing so much easier?

 

Before the introduction of the Grand Exchange in late 2007, investing was virtually unheard of. Prices were set solely by supply and demand, and could vary widely from world to world and day to day. This was not the type of environment real investing could take place in, because true investing requires a structured economy and prices driven solely by supply and demand. The more chaotic pre-Exchange environment was better suited for "old style" merchants, who hopped from world to world buying cheap and selling for a profit.

 

With the introduction of the Grand Exchange and later the trade limit, "old style" merchanting faded as the RuneScape economy became more structured and prices more regulated. The Grand Exchange also offered instant access to any tradeable item, a big difference from the chaotic searches required beforehand. This was the ideal situation for investing to begin, and so it did - encouraged by Jagex's introduction of the Grand Exchange Database (which is fittingly modelled after the New York Stock Exchange).

 

What does it take to be a successful investor?

 

Anyone can learn to invest, but there are several requirements if you want to be successful:

 

• Basic knowledge of the Grand Exchange and price graphs
  
• Knowledge of price shifts and trends
  
• At least 100k initial cash
  
• Basic common sense
  

 

The information in this guide will give you the first two, but it's up to you to provide the rest. Armed with this guide, you will have all the information you need to tackle almost any investing situation you run into.

 

Investing has almost unlimited profit potential, but there are two basic rules that govern your profit margin:

 

The more money you invest, the more profit you can make

 

Pretty simply, the more you put in the more you can get out. While 5% profit of 50K is only 2,500gp, 5% of 5M is a healthy 250K in your pocket.

 

The better the investment choices you make, the larger your profit margin

 

Again, a no-brainer. Whether you invest 50K or 5M, you'll make more profit if the item you invested in goes up by 10% then you will if it only increases by 5%.

 

Once you've become an accomplished investor and have a healthy stack of cash in your bank, you'll find that investing can bring in money faster then any other moneymaking method on Runescape, and with a fraction of the work. High level investors can easily bring in profits in the millions overnight - my personal best investment earned me a free Santa Hat over two days. The sky's the limit - and now you're ready to get started!

 

Chapter Two - Basics of Investing

 

The Investing Motto

 

At the core of the investing method is a simple law that represents the entire philosophy. Learn it well. While it may seem like common sense, it is easy to get side-tracked and lose focus.

 

Buy Cheap, Sell Dear

 

Using the Grand Exchange Graphs

 

The Grand Exchange graphs, introduced in late 2007, are THE most important tool in your investing armory. They can be accessed from the main RuneScape page, unter the "Game Guide" tab. The Grand Exchange Database's home page has two main sections, both of which are useful for investors.

 

Price Rises

 

The first section, Price Rises, reveals the items that raised the most in price over the last day, week, or month. You can access the weekly or monthly averages by clicking on the extended list, then choosing the time frame you want from the buttons on the top of the list. The monthly (30-day) averages are best for medium to long term investing, while the dailies are best for short-term investments and arbitrage.

 

Price Drops

 

The 7 and 30 day averages for price drops are most useful when you are attempting to profit off a price bounce in a crashing item. More information on price bounces is in the next Chapter, Intermediate Investing Techniques. section.

 

Identifying "Hot Items"

 

The first step in investing is to identify a "hot item" - an item that is going to rise over the next few days (for short-term investing) or the next few weeks (long-term investing). We can find hot items two ways - using the graphs, or through speculation about future updates. Update speculation is covered in the Advanced section. We'll now discuss methods of predicting and profiting from short-term fluctuations.

Predicting Short-Term Fluctuations

 

Reading Price Cycles

 

The item in the graph below, a Saradomin Platebody, has a predictable pattern of price fluctuation. Like a wave, it goes up and down repeatedly. Many items have this sort of fluctuation - it tends to be a characteristic of items used frequently but mainly by higher-end players with more money to spend.

 

The green arrows on the graph show the top of each wave and the red arrows show the bottoms. In order to profit from this item, you would have to predict the beginning (bottom) of the next wave, and buy several Saradomin Platebodies on the day when the next price was at its lowest. The price would then rise over the next several days, and you would attempt to sell right at or near the top (green arrow) of the wave.

 

 

Other items with similar "wave" graphs high-end weapons, armor, and even more expensive food (Swordfish is a great example). Because of this pattern, we can be fairly certain that an item of this sort will go up again once it has reached the bottom of a "wave". This makes wave items some of the best and safest investments possible.

 

Predicting The Beginning And End Of "Wave" Cycles

 

So how do we know exactly when to buy a "wave" item, and when to sell? Common sense tells us to buy at the bottom of a wave, and sell at the top. The secret to predicting the bottoms and tops of these fluctuations is the slope of the line. Yeah, the one you learned in math class. When the slope of the line flattens out, we know that we're at the top or bottom of a price wave. You can see the flattening slope at the beginning and ending of a cycle on either side of the arrows on the graph above. As soon as you see the slope go flat at the bottom of a price drop, it's time to buy. When it goes flat on the way up, you have to sell (although I prefer to sell before this happens to ensure that I don't get stuck with the item after it starts to fall again).

Other Factors In Choosing An Investment

 

Profit Margin

 

Let's pretend that we decide to invest in earth runes, hoping that they will rise 1gp each. If earth runes (hypothetically) cost 10gp, we'd earn a profit of 1gp for each earth rune we bought. We spend 1M on 100K earth runes, and pick up 100K profit the next day.

 

Now suppose we had decided to buy one hundred, say, addy platebodies for 10k each (a total investment of 1M). They go up 500gp overnight, leaving us with 50k profit. While the physical rise of the addy plates was larger, the percentage rise of the earth rune was larger.

 

Unless you're dealing with extremely expensive items (such as Godswords, etc) the better investment is ALWAYS the less expensive item with the larger profit margin percentage.

 

Investment Weight

 

This is an often underestimated factor in investing. Investment Weight is a measure of how easy or difficult it will be to sell your investment and profit once the price goes up. Items that are commonly traded have a very light Investment Weight, there's always someone buying or selling. Expensive or rare items, on the other hand, are very "heavy" investments because there's a much smaller market. Items that are dropping in price also have a higher investment weight, because people are unwilling to buy the item.

 

The higher the investment weight of an item, the higher the risk. The lower the Investment Weight, the safer the investment.

 

Grand Exchange Buy/Sell Limits

 

In an attempt to prevent price manipulation, Jagex introduced a series of limits on your Grand Exchange transactions. This is important to know when choosing an item to invest in, and can also be confusing when you cannot buy or sell an item and don't know why. These are the known "buy" limits imposed by Jagex:

 

Item Buying Limits

 

• 
   
  
• Runes, Arrows, Most Food Items: 10,000 per four hours
  
• Most Armor/Weapons: 100 per four hours
  
• Many Treasure Trails items: 2 per four hours
  

 

Other Limits

 

Jagex has also made it impossible to sell an item on the Grand Exchange if you have bought at least one of that item through the Exchange (or through regular trading!) in the past four hours. It is important to know this, many people have been confused when they cannot seem to sell an item they just bought even for the lowest price.

 

Bypassing These Limits

 

It can be very frustrating to only be able to buy 100 rune scimitars if you expect them to rise 2K in the next day. While there is no way to buy more then the specified amount per four hour period, there are several methods you can use to maximize your profit on buy-limited items:

 

• Buy items from other players via the unlimited, traditional trade window (only do this after you buy the maximum from the Exchange)
  
• Have a friend buy the items on the GE at the same time as you, and then trade them to you (offer them a few thousand coins for their help!)
  
• Use the "Related Items" (item chaining) tactic to profit off the effects of the rising item's price rise (more on this later)
  

 

Chapter Three - Intermediate Investing Techniques

 

Diversifying Your Investments

 

The most important part of building a profitable investing portfolio is diversifying your investments. It's important to make sure you never put all of your money into only one item - if the item tanks, you lose out big time. If you have your money in several different types of items, however, you can lose money on one or two items and still have a net profit.

 

The following picture is a sample of a diversified investment portfolio. I have a significant number of rares, Rune scimitars, Regen bracelets, and Gilded platelegs. I could have diversified my investments even more by investing in a food item as well, such as sharks or lobsters.

 

 

Profiting from a Price Crash

 

 

Every so often, an item drops exponentially - especially after a large price rise or a game update. Many people, trying to minimize their losses, try to sell the item at lowest - and nobody is willing to buy. After every major drop, there is a price bounce - usually about 1/10 to 1/5 of the way back up to the price before it started dropping.

 

Once we buy the item at the bottom, we have an extra weapon in our arsenal to help tell us when to sell.

 

After an item has a large drop in price, the bounce almost always slows a day or so after the daily average passes the 30-day average.

 

Using the same tactics as when investing in "wave" items that we learned last Chapter, we can predict when the item is bottomed-out by using the daily average line's slope. You can see the flattening daily average circled in red on the item graph to the right, a Saradomin sword.

 

Here, you can see the place where the daily average crosses the 20-day average marked by a red arrow (this is an old graph, today the line would represent the 30-day average). Shortly after it crosses this line, the "bounce" slows and begins to fall again.

Reading The Psychology of Price Fluctuations

 

Just like the real stock market, psychology plays a big part in extreme price shifts in the RuneScape economy. Psychology is a double-edged sword, there are two places where you see it's effects the most.

 

Extreme Price Rises

 

When an item starts increasing in value, even non-investors get involved. Very few people put the item on the GE, and then always for maximum. Hundreds of people put up offers for the item at maximum, far more then the available sellers. This drives the price upward even more, getting people even more excited.

 

This cycle can continue for days or even weeks, and extreme amounts of money are made. As the price gets higher, however, cautious investors start to sell out to make sure they don't lose money when the item drops. The price rise slows, then stops, as more and more people try to sell... See next section to learn what happens next.

 

Extreme Price Drops

 

Extreme drops in price, likewise, involve everyone who owns the item in question. Once the initial drop begins, caused by an update or random fluctuation, everyone tries to sell. In a panic when their items are not bought, they begin to offer it for the lowest price.

 

This, in turn, drags the item's price down like an anchor. As the price free-falls, investors watch carefully - and after it has dropped enough, begin to buy the items hoping for a bargain. This causes the price "bounce" we saw above.

 

Profiting From Buyer Psychology

 

If you buy or sell your items during the body of the rise and fall itself, you can often get a bonus because of these psychological effects - Sell rising item before it shows signs of reaching it's peak, and you're almost assured of getting the top price. If, you wait until the very peak to sell, however, you'll often find that it's even hard to sell the item for medium price. This is because the investors who watch the graphs know the item will soon drop, and the demand is lower.

 

Likewise, you can profit from the psychology of a price drop by buying the falling item before the brice bottoms out. You'll almost always be able to score the item for lowest price, and that often is a much better deal then buying for medium or highest once the price has bottomed out a day or so later.

 

Using these psychological tactics keeps you one step ahead of your competition - and in investing, one step is all it takes.

 

Chapter Four - Advanced Investing Techniques

 

Predicting The Future - Updates, And Their Effect On Prices

 

Few things have as direct or as dramatic a connection to the RuneScape economy as game updates. Besides introducing new items into the game, by providing new activities they dramatically affect the supply and/or demand for existing items already in the game.

 

Investors can profit from these updates by closely watching the RuneScape news announcements and behind-the-scenes articles. Jagex often leaks hints about upcoming updates, which allows you to prepare accordingly.

 

There is one major update per month,and several smaller ones. If, for example, you heard that a new RuneCrafting minigame was coming out with great rewards, it would be smart to stock up on items such as rune essence and varius talismans.

 

The PvP world update in October 2008 is a great example. Few updates can match the scale of the introduction of new PvP worlds and, as I predicted, the update had a huge impact on the prices of PvP related items. Items like armor, weapons, and food skyrocketed. Unfortunately, I didn't stock up on these items before the update - and once the update was in place, it was literally impossible to obtain them. Instead of giving up on profiting from the update, I used the "Item Chaining" technique to make almost 30M profit.

 

Updates almost always happen on Tuesdays and Saturdays. Be sure to buy the items before the update occurs, or else you might find it difficult to obtain them even for highest in the GE.

 

Maximizing Profit With Item Chains

 

An Item Chain is a group of related items, whose price trends follow each other. Most "item chains" will be familiar to skillers - Runite Ore, Runite Bar, and Rune Plate for example. In this item chain, Rune Plate is the top level item - the one that's bought the most by the public. Runite bar comes second and, finally, runite ore.

 

When the top-level item in a chain rises or sinks in price, the other items follow, in order. If a rune plate rises by 1k, then you can expect runite bars to rise by about 200gp each (5 bars to a plate), and runite ore afterwards. Other common item chains include cooked and uncooked foods, Summoning scrolls, pouches, and components, and many crafted items. Item chains offer profit potential in several ways:

 

Maximizing Profit

 

You can maximize your profit when investing in an item by also buying other things in the object's Item Chain. During the PvP Update, for example, I invested in Rune weapons, Runite bars, and Runite ore. Often, the item at the bottom of the price chain offers the best percentage of return.

 

Bypassing GE Buy Limits

 

If you're getting stuck with the item buying limits while you invest, you can maximize your profit by buying into other items in the object's Item Chain. This lets you buy more items per four hours - instead of only being able to buy 100 items, if there is a three-deep item chain you can buy a total of 300 items that are all linked to your original item.

 

"Exchange Price" vs. "True Price"

 

Caused by the "Price Fluctuation Psychology" discussed in Chapter 3, The "True Price" of an item is the price that players are willing to pay for an item. The "Exchange Price", on the other hand, is the average price in the Grand Exchange. The "True Price" of an item can be within 5% of the Exchange Price, either below or above it.

 

The True Price is often related to the item's trend - if the item is falling in price, the true price is often lower then the Exchange Price, and vice-versa. We discussed in the previous Chapter how to earn more buy selling when the "True Price" was highest and buying when it was lowest - now we will learn how to take advantage of a high True Price with Grand Exchange Arbitrage.

Grand Exchange Arbitrage

 

Arbitrage is, quite simply, the act of buying an item low and selling it high. This handy tactic makes use of items with a high True Price - items that are only buying or selling at the highest price. These items are almost certain to be rising, which makes this tactic possible.

 

The Grand Exchange updates once every 24 hours, although on a rare occasion it updates more then once. If you happen to be online when the update takes place, you have the oppertunity to engage in Arbitrage. Choose an item with a very high True Value that has risen in value during the update - then calculate what the top GE price was for the item BEFORE the price update. You can do this by subtracting the total price rise from the current high price.

 

You then put up an offer in the Exchange for as many of the items as you can afford - for one gp OVER the previous day's high price. You will out-offer every single offer from the previous day, and most likely completely fill your offer. Wait four hours, then re-sell the items at the current day's high price - you just made instant money. More details about arbitrage, including specific items and strategies, are available elsewhere on Rune-Tips.net.

 

Chapter Five - Tips And Tricks

 

Keeping A Cool Head

 

Investing can test your patience and your will, especially if you get too eager to earn money fast. A successful investor is cool, collected, and rational - whether it be in RuneScape or in real life. If you let your emotions get to you, you could soon find that you've overlooked an important detail - and lost millions.

 

Developing Your Investing Style

 

Every investor has their own "style". Personally, I prefer active, short term investments that are risky yet have a high profit potential. I keep almost 75% of my money in the Grand Exchange at any given time, and I'm constantly on the lookout for good investing prospects.

 

Other investors might prefer safer investments with a lower profit potential, or perhaps long-term investments with huge profit potential.

 

Thinking In Both The Long And Short Term

 

It's also important to, once you have discovered your style, attempt to balance it. If you prefer short-term investments, make sure to invest in a few long-term as well. This is an important addition to the "Balanced Investment Portfolio" we discussed in Chapter Two. It can help protect you from losses in the case of an unforseen price fluctuation, and give you more chances to score a great profit off your investments.

 

Dangerous Investing Situations

 

There are several investing situations that offer the greatest risk, but sizeable profit potential. If you can't afford to lose the money, don't even think about these. If you have money to spare and are willing to gamble for big stakes, these are the situations to watch for:

 

Newly Added Items

 

Items newly introduced to the game are famously unpredictable, and can increase or decrease rapidly in only days. These items are extremely unstable for the first few weeks after their introduction, and offer insane amounts of profit potential - but an equal amount of risk. The right item could earn you a partyhat. but the wrong one could lose you millions. Let the buyer beware.

 

Suddenly Rising or Dropping Items

 

If something rises 150% overnight, beware. These items are either the targets of large merchanting clans or the result of a Grand Exchange bug. If you stock up and the item continues to rise, all's well and good - but it's extremely possible that Jagex could "fix" the price back to its normal level right after you bought 100,000 for three times that much. Again, this is a huge gamble - risk no money that you cannot lose.

 

Cutting Your Losses

 

Sooner or later, the time is going to come when an item you invest in tanks. The following tips will help you cut your losses, and keep as much money as you can.

 

Turn It Into A Long-Term Investment

 

If you believe that the item will return to its current price in the conceivable future, a good strategy is to store the stuff in a corner of your bank as a long-term investment, until the price returns to normal. This also helps by removing the items from the market, therefore cutting the supply. A downside to this solution is that it locks up your money in the item, which is a large problem if you invested too much or don't have too much money. This is another reason it's good to diversify your investments.

 

Pull Out Immediately

 

This is the dramatic road to take. If you think the item's going for a long-term drop, get rid of them in any way possible and as fast as possible. This will contribute to the price crash, but hopefully you'll be well out of it when it drops even more. This option also frees your cash for more lucrative investments - you should make back your losses in no time.

Congratulations!

 

You've completed the Ultimate Grand Exchange Investing Guide. With your new investing knowledge, you can start working towards millions in profit on the Grand Exchange. You can refer to this guide for reference at any time - even I reread it every so often.

 

Do you have what it takes to pass the Ultimate Grand Exchange Investing exam? Test your knowledge and see if you have what it takes to be a Master Investor HERE.

 

You can put the following userbar in your siggy to show your status as a Grand Exchange Investor:

 

[url=http://www.rune-tips.net/ExchangeInvesting][img=http://www.rune-tips.net/images/UserBar.png][/url]

 

I hope you enjoyed the guide as much as I enjoyed writing it! The original guide can be found here. Please feel free to post here with any questions or comments :)

 

~Merchant

[MerchantInTheDark]

Reserved

[warlordsagan]

I already knew alot of this stuff but thanks anyways for making the guide it was a nice read.

[linker009]

=D> Thanks for that, it helped me understand the GE alot more.

Probly gonna start investing now :)

 

Is it worthwhile joining a merch clan?

[MerchantInTheDark]

=D> Thanks for that, it helped me understand the GE alot more.

Probly gonna start investing now :)

 

Is it worthwhile joining a merch clan?

 

NEVER join a merch clan, the only point of their existence is to scam you.

 

I post some good investing items on my ExchangeWatch at www.rune-tips.net/ExchangeWatch, but I always have to stress that it's not a merch clan. The items I post are rising on their own due to price fluctuations or an update, and I never buy or sell the item before I announce it.

 

Your best bet is to use the tactics in the guide and the ExchangeWatch items to learn how to merch and invest on your own, and you'll soon be making more then most of the people in any given merch clan put together.

[MerchantInTheDark]

By the way, Furies are looking really good to invest in if you haven't already. I made 2M on mine last night

[MerchantInTheDark]

Bump.

 

Infinity sets and Wizzy G sets are both under the 30-day average for the first time in ages, so they should go back up shortly.

[MerchantInTheDark]

Bump, will be updating soon with new info :]