Getting Started With Auction House Trading

This blog entry is for those of you who want to start making wow gold but aren’t sure where to start.  There are a number of posts from various people that tell you how to make hundreds or even thousands of gold each day using one of the more popular professions.  The problem is, not everyone has those professions and leveling one will cost you several thousand gold coins.  On top of that, you can’t use them if you are just starting and your character is still leveling.  So here’s your catch 22 – in order to use their advise you need the gold, which is what you lack in the first place.  I have no problems making 1-3k gold each day without using any professions by following a few simple steps that are described below.  Most of them are common sense, but you’ll be surprised how many people miss some of them.

• Determine how much gold you can use to start with.  Don’t use all you have since you might need it for other purposes.  For example, if you raid, you will need gold for repairs.  If you are still leveling, you might need gold to learn new skills.  Make sure you have enough and use the rest to start your business.
• Decide what is the minimum profit margin you are willing to take.  A profit margin is determined by how much you sell something versus how much you paid for it:

Profit Margin = (Sale Price – AH Commissions – Un-refunded Listing Fees – Cost)/Cost

I use 15%-20% as my target, but you can pick a different number that makes you feel comfortable.  Just don’t expect it to be much higher than 50% all the time.  Occasionally, you’ll make crazy profits (buy for 1g and sell for 100g), but this is very very rare.  For the rest of the post, I’ll assume that you want to go with 20% margin.

• Now that you have your starting capital and know what profits you want to get, you need to find your first purchase.  When you make your first purchases, you want to go for something that sells a lot.  Good examples are herbs used for making flasks and elixirs, ore used for prospecting, cloth used for popular items and so on.  Your goal here is to buy something that is going to be easy to sell.  You don’t want to invest all you have and get stuck with it because there are no buyers for a few weeks.  How to spot these items if you don’t know what they are?  There are usually a lot of them up for sale by a large number of different sellers. 
• The next step is to determine the price which will let you sell everything with at least 20% markup (replace 20% with whatever margin you picked earlier).  If you are smart (and I know you are), you might ask how do you know  what this price is?  This is the most difficult part about playing the AH game.  You need to KNOW THE MARKET YOU WANT TO PLAY IN.  In other words, you need to know the average prices on the goods you buy.  You need to know how high they get and how low they get.  Without this knowledge you are more likely to lose gold than to make it.  So, how do you gain this knowledge?  You need to watch the markets.  You can use addons such as Auctioneer or you can do it manually – it is up to you.  But you have to do it.  It takes time.  You might want to wait a few days before making your first investment.  Don’t buy the first thing you see on the AH because it is the cheapest - unless you are sure it is a good deal.  So let’s use an example here.  Suppose you’ve been watching the prices on Frost Lotus and it usually sells around 30g each.  The prices can go as high up as 50 and as low as 18.  Let’s pick your target price at 29g for resale.  and let’s say that you will have to list it twice before someone buys it.  Now we do a little bit of math to determine how much you want to pay for it:

        Buy Price = (Sale Price – AH commissions – Un-refunded AH listing fees)/(1+margin)

If we use 20% margin and the lotus prices I described above, we’ll get:

        Buy Price = (29g – 1.45g - 0.6g)/(1+0.2) = 22.45g

This is the price at which you can buy Frost Lotus if you want to get 20% profits.

• Now you have your initial gold, you know what to buy and you know how much to pay for it.  Here’s another very important part.  Unless you are willing to take lower profits or try to sell it for a higher price, don’t buy anything that costs more than the price you determined in the previous step (22.45g in my example).  Remember, you want to make gold, not to buy stuff. 
• Once you buy and sell your first item(s), reinvest the profits into the next one.

 

That’s about it.  In a nutshell, this is all you need to get started.  Hope you found it useful.