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Guest post written by Ben Sanders.
Guild Wars 2 has a feature that I've only encountered in one game previously - the ability to create buy orders and sell orders. I have previously enjoyed buy orders and sell orders in Eve Online, but had to make do with an auction house for World of Warcraft and for Diablo 3, which is sort of only half the trading functionality.
Introduction - How buy and sell orders work
Sell orders are very similar to auctions that have a buyout price; anyone can see the sell order, and choose to buy at that price. Unlike auctions, one buys from the lowest buy order - with auctions, for example, you could choose to buy the overpriced ore at 27 gold instead of the cheap ore at 3 gold. With sell orders, however, your order is always fulfilled from the lowest priced sell orders.
Diablo 3 has the equivalent of sell orders for it's commodities market.
When a trader creates a sell order, the things they are selling vanish from their inventory, and (in GW2) they are charged a listing fee. The items remain on the trading post until either someone buys them, or the trader cancels the order, and gets their items back.
Buy orders, however, are where the fun starts for a trader. Instead of putting goods up on the trading post, they put up funds with an offer to buy goods at a particular price. They supply the trading post with enough money to cover the transaction.
So when someone with something to sell (a farmer, say) goes to the trading post to sell their items, they have a choice.
Either they can sell at the price of the highest buy order, and they will get money immediately (the trader has already put up the money to buy at that price). Or they can list their goods as a sell order, either choosing to undercut the current cheapest sell order to try and get a quick sale, or at a price that seems reasonable to them, because they think the existing sell orders will sell out in a reasonable amount of time.
What difference does this make to a trader?
The question of 'What is something worth?' is one that was often hard to answer with an auction house, especially if you were new to a market. You could look on the auction house, and the current auctions tell you 'Someone is willing to sell at such a price', but the problem was determining demand - sometimes no one was willing to buy at that price, and things just remained unsold auctions until they expired. As one got to know a market better, one could learn more about the demand too.
With both buy and sell orders on the trading post, even when new to that market, you get a range of prices into which an item's value falls. If there are buy orders, then the item is currently worth at least as much as the highest buy order, and if there are sell orders, it is worth no more than the cost of the buying from the sell orders.
The size of the range between the buy and sell orders (the margin) is an indication of the volume of the market; if the good is traded very frequently, the margin will tend to be smaller, with less room for profit per item. If there is a big margin, there is probably a lower volume being traded, and there is more doubt as to the fair price.
Markco's mantra was always 'Buy Cheap, Sell Normal'. Buy and sell orders give you many more opportunities to do this - the trader exchanges time for money. Instead of getting an immediate result, instead you place buy orders so that other people can immediately sell their goods, and place sell orders, so that people who are not interested in waiting for buy orders to be fulfilled, and buy things instantly.
My experiences of farmers in World of Warcraft suggest that they really like getting their money immediately, and will sometimes take a significant cut in the price they will sell at to achieve this.
Some people would make arrangements with farmers to buy any amount of certain goods at a prearranged price; I would expect this to happen much less in Guild Wars 2, because of the ability for the farmer to sell to buy orders to get immediate funds.
If you suspect that the price of something is going to go down, with an excess of supply reducing the price, then you can preemptively place a buy order to be ready to buy that good when it is cheap.
When playing World of Warcraft, I often tried to buy ore on a Tuesday morning, as the auctions often had a low buyout then. If I had had buy orders available, I could instead have created them on Monday evenings, and the Monday night farmers would have been able to sell to me immediately. It's no longer a game of timing, but instead a game of getting the correct pricing for my buy order. As a trader, I like to think that I'm better at getting the pricing right, rather than trying to race the other traders by getting up at the right time on a Tuesday morning.
This is very similar to listing sell orders at a higher price than the current lowest sell orders, because you think the price is going to go up. We could already do this in games that just had an auction house, but having buy and sell orders allow speculation in both directions.
Thanks for reading,