In February of 2009, both of my binders were stolen during a Regional event. At the time, they were worth over $1,000. Those binders weren't just the culmination of over a year of work, but also my hotel, airfare and expenses for the last major event I planned to play, Shonen Jump Indianapolis. With six months to prepare for the event, I started a new binder with two copies of Banisher of Radiance that were given to me by a friend. In the next six months, my renewed vigor enabled me to turn two rares into a collection that sold for over $2,000.
This isn't a rare story. In fact, anyone can do this if they are willing to invest even minimal effort. The growth of a binder is exponential to a certain point; as your collection grows, you are able to make larger investments and increase your profit margins. Even more intriguing is the fact that, until you reach a relatively large pool of capitol, the return on investment seen by savvy Yu-Gi-Oh! traders is higher than that which you would see if you invested the same amount of capital in the stock market. If you invest $200-$1,000 in a Yu-Gi-Oh! collection and fail to breach a 100% annual growth, you probably could have done better. Conversely, a beginning stock investor reaching a 100% annual growth would celebrate a phenomenal year. Obviously, there is a ceiling to the exponential growth seen in Yu-Gi-Oh! investing, but that ceiling is high enough to allow for your profits to provide you with the funds necessary to make beginning investments in other fields.
This week's article will focus on the general fundamentals of how to make money by investing in your binder. Next week, we will move to specific strategies to maximize the profits made while minimizing the time invested.
There are two general ways to make money by trading:
1. Intake for slightly less than the price for which you can get rid of a card; also known as "upgrade trading".
2. Predict an upcoming fluctuation in price and either invest to make a profit or liquidate to avoid a loss.
Upgrade Trading Upgrade trading seems like a simple process, but it's far more difficult to do than one might expect. Having an efficient system of tracking prices and cataloging your collection are two absolutely vital elements to being a successful trader. These are simple concepts, but they are made ambiguous by the relative and fluctuating nature of cards' prices.
First, let's answer a simple Question: "Why is there profit in investing in Yu-Gi-Oh! cards?"
Your first answer is probably "because I can trade a card of lesser value for one of more value, and thus profit." But if you take a moment to consider this concept, it's rather astounding. If two people liquidated their collection and attempted to trade in American dollars, you'd be hard pressed to find someone willing to give you their "tiny little dime" for your "big, super-cool nickel". The reason you're able to profit is because the value of Yu-Gi-Oh! cards is highly subjective. In fact, if the game wasn't so darn fun to play, they'd be worthless! The consumer gives value to a card, because it holds value to them. The number of consumers wishing to obtain that card is weighed against the number of cards in existence, and thus is calculated the "meta-value" of a card. However, the "meta-value" of a card cannot be perfectly calculated, because it is not a static number.
This concept becomes even more ambiguous when you consider the effect of sub-market systems. The "meta-value" of a card shouldn't be your only consideration. Even if Yugi Moto himself walked up to you and said that the true price of Card A is $5, a number calculated from omnipotent knowledge of how many copies of the card are in existence (and each copy's condition) and the exact need for the card within the greater Yu-Gi-Oh! community, you would still find that the true price of a card is largely irrelevant. More important than the true worth of a card is the relative worth of a card; what is it worth within the communities in which you are active? Even though Card A is truly worth $5, I may be at a local card shop in which there are dozens of duelists without a single copy of it. In that smaller market system, the demand for Card A will rise drastically, as will its value.
Many of the fundamentals may seem too intuitive to consider in depth, but understanding them is essential to building a more complex set of tools that will save you money, time and energy. The fundamental guidelines I usually work by are very simple:
1. Engage as many different markets as possible.
2. Buy low and sell high.
3. Your reputation is worth money! Make people smile, be forthcoming, try to ensure both parties profit, and have a lenient return policy.
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How Multiple Markets can Affect Profits In upgrade trading, engaging more markets than the rest of the Yu-Gi-Oh! community is what sets you apart from the pack. The term "market" in this context is a signifier for a sub-community within the larger Yu-Gi-Oh! community which has a shared sense of value of cards. Often, you'll find that the distance travelled between two card shops means a vast difference in the monetary value of your collection. More importantly, it may Shift the relative value of singles, changing the proportional value of one card with another. The ability to recognize these situations as opportunities can yield a vast amount of profit made, while still leaving a smile on the face of everyone with whom you do business.
For example, let's say that you live near two card shops. At the first card shop, there is a particularly high demand for Reborn Tengu. They value it at $17 a piece. However, there's a slightly larger concentration of Pot of Duality than at the average card shop, and they price it at about $8. At the second card shop, the opposite is true. They generally value Reborn Tengu at $14 and Pot of Duality at $10. You've just stumbled upon the proverbial gold mine. Consider your job as a trader something in the similitude of entropy; your job is to facilitate balance. Where there is a particularly high concentration of a card in a sub-market, the price drops. Trade for that card! Where there is a particularly low concentration of a card in a sub-market, the price rises. Trade the card away! If you are able to bridge two opposing markets, your profit is the additive distance of both of the sub-markets from the true "average".
For example, let's say you engage a market of only one other person. His price on every card never changes. This means that there is no profit for you to make. It doesn't matter if you buy his three copies of Tour Guide From the Underworld for $5 a piece if he is the only person you are trading with...because you'll be selling them back to him for $5 each. Add a second person who values Tour Guide at its market price (let's say, for argument's sake, $150). In this situation, we are engaging two markets and make $145 in profit. Expand your horizons and find a completely different card shop in which there isn't a single copy of Tour Guide, and you'll find that the price might raise to $170. Now, you've made $165. The more markets you engage, the more fluctuations in price you'll be able to find and the more you will profit. Go to different card shops. Trade online. Do what you can to learn everyone's pricing system, and thus better recognize how they differ from people in other markets.
Another important benefit of engaging multiple market systems is "volume". “Volume,” in this situation, refers to the number of trades you are able to complete. Whether it be trading Yu-Gi-Oh! cards, playing professional poker or investing in the stock market, volume is king. Making a single trade yielding a $1 profit isn't very exciting, but making that same trade dozens, hundreds, or thousands of times starts to sound like an intriguing venture very quickly. A small edge stretched across a vast number of repetitions will yield a vast profit over time. If you need proof, research how much profit McDonald's makes on each cheeseburger they sell and compare it with their monthly overhead.
There are only so many trades to be made in any given market, because there is only so much demand to be met. Even if expanding your trading network doesn't raise your average profit per trade (which it does), it will allow you to complete more of them. By fully engaging multiple market systems, comparing how they value cards and following the simple dogma of “buy low, sell high,” you'll find innumerable opportunities for profit.
Closed Market Systems A closed market system is a market which isn't connected to the larger Yu-Gi-Oh! community. An example such a closed market system became apparent to me in 2009. I found a small card shop that only ran Traditional tournaments. None of the players bought cards online, and only one of them attended the occasional major tournament. Because the tournaments at the card shop were Traditional, there were cards, such as Painful Choice, Chaos Emperor Dragon, Yata Gurasu, etc., which were worth between 50 cents to a dollar on eBay but were valued at $5 or more in this closed market system. There just weren't enough copies to go around, and competition for them was fairly fierce. I guaranteed continued and smooth business by ensuring that everyone who traded with me also made a profit. If I valued a card at 50 cents and they valued it at $5, I would trade it to them for $3. Of course, it wasn't exactly charity work; I was able to turn a $20 investment into three Destiny Draw, three Malicious and three Card Trooper within just a couple months. For those who don't recall that format, I might as well be talking about Scrap Dragons and Rescue Rabbits.
If you have multiple card shops near you, get to them. "Brick and mortar" market systems will yield a higher average profit per trade. Players trading online are more serious about the game, meaning they are more likely to have stronger trading methods. If you've ever traded online, you've probably found this to be true. However, don't let that stop you from connecting to the online market. While online trading communities don't yield as high a return as brick and mortar communities, but they do allow for constant trading. Take the small profits with the large ones. After all, it's all profit.
The most important thing to take away from trading in multiple markets is the benefit of transparency. If you are upfront about your pricing and your profit margin, the people with whom you trade will also be transparent about their pricing. Small market systems have particular needs. It's possible to can make long-term relationships with the people you trade with, which allows for high-volume, repetitive trades that yield a much higher profit in the long run. These relationships are far more valuable than the profit made in a single trade.
You now understand how the fundamental concepts of Supply and Demand interact with the Yu-Gi-Oh! community, and how you can use accurate measurements of Supply and Demand within different tiers of market systems to make a steady profit. Next week we will discuss specific strategies I'm currently using to generate profits, including top picks for specific upgrade-trades. We'll discuss the power a good reputation holds, and other strategies for remaining reputable, happy and more profitable. We'll discuss the impact of aesthetics and specific methods of organizing your investments to guide the people you trade with. Finally, I'll share some of the market research I've completed and attempt to use the data to predict (as accurately as possible) price fluctuations of a given card given the change of specified variables.
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