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postheadericon Warcraft Advanced Gold Guide – Standard Deviation

Warcraft Standard Deviation

 

The standard deviation bell curve.

You can work it all out for yourself..or the “Material Master” spreadsheet that comes as a free gift with this guide can do it all for you.

Above, the average price is 10..in terms of mean and model average.

The item HAS sold for 2 – and could sell for 18.

No guessing when you should buy and when you should sell then.

So what to have in your portfolio. Here’s how to decide which items
To trade in.

Ok, here’s the bit you were dreading. The maths. We have gone out of our way to make this as simple as possible.

Good items to trade in a single market have a large range "standard deviation" of price.   
Standard deviation is a measure of how much an measured item deviates from it’s median (average) price over time.

So here is Lesser Healing Potion. We measure it’s price 5 times over 5 days. The prices were (in silver pieces)

        80s
        77s
        82s
        79s
        83s

This gives an average price over the 5 measurements of 80.2 silver and a standard deviation of 2.39 (roughly 23.9 percent)
    Is this any good ?

Well, copper ore gives these values over the same period

        45s
        140s
        84s
        47s
        85s
This has exactly the same average of 80.2 silver. However the standard deviation is 38.6  or 386% variation from the mean

Standard deviation is a vital statistic for checking the price volatility of an item. In simple terms :

The greater the deviation, the greater the profit potential of that item.

It means that an item price varies wildly. These are the items you need to watch.

Included with the Advanced Gold Guide is a spreadsheet we call “The Material Master”

With this we have been tracking the price volatility across many servers and over a long period of time.

To ensure that we are dealing with a consistent set of set across all the servers, we use a method known as “normalizing”

As we mentioned before, the prices vary wildly across servers, to simply add all the prices together would be to overvalue some servers and to undervalue the data from others.

If you use the “Material Master” you can see that it does not have prices in it at all, it has the variations of price from an index.

Here’s how price indexing works.

  •   First use an add-on or manually  check the selling price of items at a particular time period
  •   Next note the selling price of each item at that time period.
  •   Repeat this process over at least 8 times. Deliberately choosing different times of the day, days of the  week etc. NB. This is not a true random, as we are actively making decisions when to collect the data. Choosing  holidays, weekends, Patch days etc to measure the effect.
  •   Index the results. This means
  •   Nominating the faction with the lowest average price as the ”Buy”  faction
      Using the HIGHEST PRICE FROM THE “BUY” faction AS THE INDEX, AND GIVING IT THE VALUE    1.00               (one   point zero zero) then measuring all other prices as a ratio of your index price.
  •   Putting all the prices in a row against the item in date order.
  • Taking an average of the price for Alliance, and comparing that with the average price for Horde

Use this method of indexing whether or not you are considering cross faction trading. There is no point struggling for profit in the wrong market place.

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