Simple Trading Formula For Auction House Flipping (Patreon)

(This is a preliminary article. It is VERY easy to make mistakes when writing articles which use mathematics. Patreons with a background are encouraged to point out any errors.)

This patreon has a lot of information on gold-making but comparatively little on auction house trading-something I plant to remedy. Trading can make very large profits in terms of gold - vastly more than normal gold farming - potentially these could be traded for significant amounts of real world currency even in richer nations.

The simplest method of trading is "flipping" or buying something for a low price and selling it for a high price. Many players do this successfully-in this article I want to show how we can use mathematical techniques to get an advantage over the competition.

It is important to understand I have used formal mathematical notation below but with a simple explanation of what to type into a calculator after that. You do NOT need to speak math to understand this article.

The very simplest form of flipping requires any item to have a relatively stable market value with its price fluctuating randomly based on who happens to be at the auction house at any given time.

We are going to work out a price point to buy/sell an item by calculating the historical variance of the market.  

Let's say the daily lowest buyout prices for Card of Omens over 7 days are:

Day 1: 4.2 gold Day 2: 4.5 gold Day 3: 4.1 gold Day 4: 4.8 gold Day 5: 4.3 gold Day 6: 4.6 gold Day 7: 4.4 gold

Step 1: Calculate the mean (average) price Notation: μ = Σx / n = 30.9 / 7 ≈ 4.41 gold

Calculator steps:

• Add all prices: 4.2 + 4.5 + 4.1 + 4.8 + 4.3 + 4.6 + 4.4 = 30.9

• Divide the result by 7: 30.9 ÷ 7 = 4.41

Step 2: Calculate the variance Notation: Σ(x - μ)² = 0.3487

Calculator steps for each day:

• Subtract 4.41 from the day's price

• Square the result (multiply it by itself)

• Add up all these squared differences

Day 1: (4.2 - 4.41)² = (-0.21)² = 0.21 × 0.21 = 0.0441 Day 2: (4.5 - 4.41)² = (0.09)² = 0.09 × 0.09 = 0.0081 Day 3: (4.1 - 4.41)² = (-0.31)² = 0.31 × 0.31 = 0.0961 Day 4: (4.8 - 4.41)² = (0.39)² = 0.39 × 0.39 = 0.1521 Day 5: (4.3 - 4.41)² = (-0.11)² = 0.11 × 0.11 = 0.0121 Day 6: (4.6 - 4.41)² = (0.19)² = 0.19 × 0.19 = 0.0361 Day 7: (4.4 - 4.41)² = (-0.01)² = 0.01 × 0.01 = 0.0001

Sum: 0.0441 + 0.0081 + 0.0961 + 0.1521 + 0.0121 + 0.0361 + 0.0001 = 0.3487

Step 3: Apply the variance formula Notation: Variance = Σ(x - μ)² / (n - 1) = 0.3487 / 6 ≈ 0.0581 gold²

Calculator steps:

• Divide 0.3487 by 6: 0.3487 ÷ 6 = 0.0581

Step 4: Calculate standard deviation Notation: Standard deviation = √Variance = √0.0581 ≈ 0.24 gold

Calculator steps:

• Find the square root of 0.0581: √0.0581 = 0.24 (most calculators have a √ button)

Interpretation:

• The average price is 4.41 gold.

• Prices typically deviate from this average by about 0.24 gold.

• You might consider buying when the price is below 4.17 gold (4.41 - 0.24).

• You could aim to sell when the price is above 4.65 gold (4.41 + 0.24).

This analysis shows that Card of Omens has a stable price with small fluctuations, making it a low-risk, low-reward item for trading on the auction house.

This approach can be used to make gold trading any item-this is just an example.

This method works very well for items whose value doesn't often change because of some external factor. For example raiding materials go up dramatically before the raiding season starts so the above formulas wouldn't be useful.