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Arbitrage, popularly called merching, 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 players to make money. This became much less common after the addition of the Grand Exchange. After the Grand Exchange update, it was no longer simple for merchants to act as an intermediary between an item buyer/consumer who seeks to easily sell and a seller/supplier who seeks to easily buy — the Grand Exchange replaced this. Some players, however, began using the Grand Exchange to make money in other ways—long term trend prediction, time-based arbitrage, price manipulation, Grand Exchange to "real-price" arbitrage, and item conversion.
Types of merchanting
Players can make money in the Grand Exchange through several methods.
- "Investing": This involves predicting an item's long-term price trend and then acting upon it. A player will buy as much as possible of an item when they think it is at a low point and sell it when they think it has reached a high point. To make money with this method, players must accurately make a prediction as to how a future or current game update or other in-game event will affect item prices in the future. An example of this is the currenting investing on fish masks, which are expected to shoot up in price.
- "Bulk quantity flipping": This method buys an item with a stable sell-buy difference of a few coins and is usually on items that have a high quantity such as steel arrows or mithril bolts. To really start making cash, it usually takes at least a few million coins, but if you have the cash you can make a decent profit and get out of the trade right before you log off and won't be surprised by price movements the next day.
- "Flipping": This involves buying items with the intention of selling them at a slightly higher price in the short term, often immediately after buying or even while buying. This method is a kind of time-based arbitrage: players act as an intermediary between buyers in one time period who want to immediately buy an item and sellers in another time period who want to immediately sell this item. This method can be effective when there are fewer general users in the Grand Exchange — when the difference between the buying and selling prices is large, but buying and selling take a long time, and when there are many general users in the Grand Exchange — when the difference between buying and selling prices is small, but buying and selling happen quickly.
How the Grand Exchange works
Understanding the Grand Exchange is important to trading. Free players may have 2 slots, while members may have 6.
Many items have a maximum number that can be bought every four hours. A full list of the maximum purchases per hour can be seen here.
If an offer is placed in the Grand Exchange, the game will search for all offers meeting your price or better, and instantly complete those trades, getting the prices of the already existing offers (not some sort of compromise price). If the offer is then not fully completed, it will wait until it is found by people placing in offers. Thus, all trades occurring in the Grand Exchange occur instantly for one person and not instantly for the other.
Basically, if you are trying to merchant, you do not want your half of the deal to be the instant half because you could have gotten a better price by waiting.
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 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.
Imagine that you could buy an item instantly, then sell it instantly. As an example, let's say that the abyssal whip is 300,000 coins medium price, and you instantly buy for 275,000 coins, and instantly sell for 250,000 coins. This means that at the current time it is possible to buy or sell whips for any price between those two, but not outside this range. Of course, if you were buying, you would want to buy for maybe 250,001 coins, and if you were selling, you'd want to sell for maybe 274,999 coins. You want to be the person who gets a good deal by getting people's instantly completed offers. You want to pay as little as possible, or sell for as much as possible, so that you beat out the next person in line for those instantly completed offers.
The two most important elements of investing are to be aware of prices and price trends, and also how recent updates or general trends in Runescape are affecting the market. Following are some investment strategies. However, as with all investments, there is never an absolute guarantee for profit or loss.
Carefully watch the price of an item and buy it when the price starts going down or begins to level off. Ideally you would sell while the item is still going up in price, the day before the price reverses and item starts going down in price. However, it is not always easy to predict exactly when this will be. Players may want to explore the exchange graphs on the item's page to examine price trends. Players may also find the Grand Exchange Market Watch helpful.
Reading the Behind the Scenes and other updates can give a hint of what items may become high demand in the future. However, be cautious of the fact that if enough players think likewise, the demand may end up being too high, causing the prices to crash when they all try and sell at the same time.
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 an item falling in price, by buying for much below the guide price and selling for a little above the guide price.
Remember that it can be difficult to buy an item for below guide price and sell for above guide price, unless the price actually changes from falling to rising, because prices are virtually always either falling or rising, and often only switch every few days. Advice to buy for a low price and sell at a high one is not sound because it is very unlikely for this to occur unless you are investing and are actually predicting a price reversal.To determine the buy/sell range, buy one item at considerably above the market price. The amount it buys for is the high price(the amount you buy it for). Now sell that one item at well below the market price. The amount it buys for is the low price(the amount you sell it for). If the items cannot be bought or sold at considerably above or below the market price, it would be unsuitable for flipping.
If you buy an item and find that a major crash has started and you cannot sell at a low price, you can either hang on 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. A wise rule is to always 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 untested item.
You also want to find items that are in your price range. If you only have 100,000 coins to invest on an item, you probably don't want to pick an item that is 50,000 coins as you would only be able to buy 2 of them. Instead pick items that are about 250-500 coins, that way you could buy up to 200-400 of them. Quantity is usually more important than price. The key is profit per hour. If you can move more items quicker, you might make more money even though it's a smaller profit on each individual item. Ever wonder why stores have big sales? This is why.
Another important concept is diversification. Do not put all your money on one item. If it drops in price, you are in trouble. Try to pick four to six good items (you may have to experiment to find four good ones) and just keep buying low, and selling high. Remember there are always impatient players who get rare items as a drop, such as corrupt dragon items, and they need cash fast, so they will sell for a low price. Then later will come the impatient buyer, who has to have that item right away and is willing to pay a lot of money. Patience is one of the keys to making money in trading...
Common flipping items
Remember to always check the price graphs on item pages before considering using them for flipping.
- Arrows (steel, mithril, rune)
- Throwing Knives (bronze, iron, rune)
- Darts (bronze, iron, dragon)
- Potions (almost everything best is potion flask)
- Hides (yak, snake, green dragon, blue dragon, red dragon, black dragon)
- Rune and pure essence
- Runes (air, water, nature, dust, cosmic, chaos, law, death, blood)
- Logs (normal, maple, yew, magic)
- Bars (iron, silver, mithril)
- Seeds (harralander, ranarr, snapdragon, limpwurt, watermelon)
- Herbs (harralander, kwuarm, ranarr, lantadyme, snapdragon)
- Pouches (Yak, honey badger, ibis)
- Summoning ingredients (marigold, red spider eggs, raw bird meat)
- Raw fish (tuna, lobster, swordfish, shark)
- Food (lobster, swordfish, tuna, tuna potato, monkfish, shark, pizza, rocktails)
- PvP and PvM gear (Dragon Boots, Barrows)
If a money making method is out of date, you can this page to improve it.
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