Judge yourself. Harshly.

Written by Corbin Hosler on . Posted in Finance, Magic Culture

Judge yourself. Harshly.

Corbin Hosler

Corbin Hosler is a journalist living in the hotbed of Magic that is Oklahoma. He started playing in Shadowmoor and chased the Pro Tour dream for a few years, culminating in a Star City Games Legacy Open finals appearance in 2011 before deciding to turn to trading and speculation full-time. He writes weekly at QuietSpeculation.com and biweekly for LegitMTG. He also cohosts Brainstorm Brewery, the only financial podcast on the net.

You may be new to the Magic finance scene, but you have really done it this time. You saw the potential of a sleeper card, in this case Wolfir Silverheart, and you knew its time would come.

And it did. The card broke out at Pro Tour Avacyn Restored, and you looked like a genius. You had a dozen copies in your binder, and everyone at your FNM was impressed with how far ahead of the metagame you were. Suddenly those Silverhearts are worth a ton of money, and you feel like a hero.

Maybe you’ve been in this position. I have, and it’s nice. I’ve been ahead of a lot of calls that I haven’t invested in and then missed out, but occasionally I actually buy in, and it pays off big-time.

Or does it?

Tell me, what happened to those Wolfir Silverhearts? Did you play the hot new deck, or maybe trade a few of them. Did you sell a few of them?

Or, are they still sitting in your binder as you lament how far the card has fallen?

The Myth of Making Profits

I introduced this theory last year, and I want to elaborate on it today for everyone. Let me start by being extremely clear.

You have NOT made a dime until the cash is in your hands.

I can’t tell you how many times I’ve witnessed the following scenario. A player opens his binder and has an impressive stack of something moderately expensive like Hero of Bladehold. I’ll comment on how nice it is to have so many expensive cards.

“Yeah, and I got them all when they were super cheap, too. I made like $10 apiece on them.”

At which point I have a mini-aneurysm in my brain.

Or, maybe not quite as life-threatening, I do a little inward eye-roll.

It’s really awesome that you have a bunch of expensive cards. It’s even cooler if you got them cheap. But you have not “made” a single red cent.

Say it with me: You Make Money When You Sell. And only then. Cash in hand is what matters. Now, I’m not saying you aren’t going to make money with good speculating, nor am I saying that you aren’t building the value of your binder. Both of those are fine and admirable goals, but in the economic world these are called unrealized profits. And, just like stock options, the amount of unrealized profit is quite variable, and this is where people get in trouble.

Maybe your goal isn’t to make money by cashing out, you just want to have everything at your disposal to play with. That’s fine, but if that’s the case I suggest just buying a playset of every new set and not bother with playing the market. But if you’re in it to trade, you need to be aware of this. If you absolutely need a card to play with, then by all means keep it even if you know it will drop in price. But if it’s in your trade binder, you need to keep yourself honest.

Avoiding the Pitfall

Your binder today is likely worth less than it was six months ago. What I mean by that is, unless you’ve been following the advice myself (and others) have been giving for months and liquidating all the Scars of Mirrodin cards you own, then all those Scars cards are worth less than they were six months ago.

Using the Heroes in our buddy’s binder, we can see that a playset was around $65-70 retail six months ago, but are worth less than half that now. Likewise, Silverhearts are down to $4-5, a far cry from the $12-14 they were fetching after the Pro Tour.

The easiest way to avoid this is to cash out when a card is at its peak. Now, we can’t always know exactly when a card is peaked, but we can do a reasonable approximation a lot of the time. It’s better to miss out on another 10 percent growth on a card than be left holding the pieces when it begins to freefall and no one wants your copies. There’s also the usual Standard rotation, which kills prices months before it actually takes place. This is easy to play around: just move the cards from the rotating block in the early summer before prices really nose-dive.

Judge yourself

If you’re in this to profit from trading (and as you’re reading this, I assume you are), then you need to be your harshest critic. It goes back to the Myth of Making Profits. You can make “all the value” trading at FNM one night, but if you’re just letting money rot away in your binder while spending $15 to draft, you’re not being honest with yourself.

I can honestly say that I’ve made more money from Magic in my lifetime than I’ve spent on it, and that’s something very few people can say. I can make this claim because I meticulously track my cashflow. I have been lucky enough to play on store credit alone for a few years now, but for bigger trips I keep track of my every expense, from the gas it takes me to get there to the money I spend at the convenience store on the way. I don’t go so far as to track my gas usage for travel to FNM, though you certainly could if you were inclined.

I also track what I make when I cash out my cards at big events, and it simply becomes X-Y=Profit. I do this easily with a note on my iPhone, and it’s something that’s easy to do for everyone. It also works with trading. If you’re not confident in your trading skills, simply snap a photo or jot down the trade you’ve made, and look it up later online to see how you did. I recommend using both buylist and retail pricing for this check. It will help you to spot some of the trends that go on in the buy-to-sell spread for many cards.

And That’s Not All …

There’s another, mostly unseen, benefit to tracking your trades. Let me elaborate. When I first started writing, inspired by Legit’s own Jon Medina and Pack To Power, I took a picture of every single trade I made at FNM. I didn’t have an iPhone at the time, si I used a small digital camera instead. If neither of those are options for you, a simple pen and paper will do. The result of this practice was articles where I tracked every trade I made that week at FNM or another event.

The reason I did this initially was to show people just how quickly the small value you accumulate trading turns into real money. But as I continued the practice, I realized I was getting a lot more out of it than just that.

The first thing that comes to mind is how much better I became at remembering prices. For many people getting into trading, the barrier of knowing card prices can be a big problem. But by tracking my trades and then reviewing them later, I was able to clearly see just how I did on any particular trade. You get burned once by misremembering a card’s price and then look it up later and see how wrong you were, you’re a lot more likely to remember it the next time it comes up.

I really can’t stress this enough. If you’re looking to become a more active trader, or even if you’re just someone looking to pick up a few cards without getting ripped off, record and review your trades. Nothing else will bring you along faster.

Another benefit of tracking your trades, besides being able to watch the “net worth” of your binder go up over time, is that you can look back at them a few months later and draw conclusions from those trades. For instance, let’s look at this one from back when I was writing this series. This is from exactly two years ago, August of 2010.

Then

His:
Primeval Titan ($50)
Mine:
Creeping Tar Pit ($3.50)
Sensei’s Divining Top ($8)
Cabal Therapy ($5)
Coralhelm Commander ($4)
Daze ($2.50)
Mistbind Clique ($4)
Secluded Glen ($4)
Cryptic Command ($13)
Net: $6

Today

His:
Primeval Titan ($12)
Mine:
Creeping Tar Pit ($3)
Sensei’s Divining Top ($15)
Cabal Therapy ($6)
Coralhelm Commander ($3)
Daze ($3)
Mistbind Clique ($3)
Secluded Glen ($2)
Cryptic Command ($15)
Net: Negative $38

Looking at this trade, we can see how destroyed I am by today’s prices. At the time, though, no one blinked an eye at this trade. Goyf had no future in the changing Extended format, and Legacy was nothing like it was today. Primetime, on the other hand, was absolutely tearing up Standard, the only format anyone cared about.

But we all know what happened after that. Having hot Standard cards like Primetime or Bonfire of the Damned is great. You have all the value, and the most impressive trade binder to boot. But this trade empirically and emphatically dismisses the notion that this is the way to build lasting success as a trader. You don’t want to be stuck with these high-dollar Standard cards a few years down the road. It’s why dealers pay less cash on them and why I always advocate trading into more stable stock.

Looking at today’s market, the obvious parallel is Bonfire. Yes, Bonfire is insane and well worth the $40 price tag it carries. That said, it’s nearing its ceiling, which I don’t see as more than $45-50 at the very max, so maybe you ought to consider trading any copies you have into staple stocks with more upside than something like Bonfire.

Luckily for me, I knew this principle two years ago, and followed my own advice, resulting in this:

Then

His:
Tarmogoyf ($60)
Heavily Played Survival of the Fittest ($23)
Mine:
Primeval Titan ($50)
3x Destructive Force ($15)
2x Archive Trap ($4)
Net: $14

Today

His:
Tarmogoyf ($90)
Heavily Played Survival of the Fittest ($15)
Mine:
Primeval Titan ($12)
3x Destructive Force ($1.50)
2x Archive Trap ($4)
Net: $87

Primeval Titan. Bonfire of the Damned. The card names don’t matter. You hear all the time about the tried-and-true principles of avoiding high-dollar Standard cards, but there’s nothing like seeing it in front of you in black and white, something you can only accomplish by recording your trade for future dates. I would never have remembered the details of this trade if it wasn’t posted on the Internet (and my hard drive) for eternity, and without this reminder fresh on my mind I could fall into these old traps, whether it’s holding onto cards for too long or overinvesting in a particular format. This is a perfect demonstration of the Myth of Making Profits at work, and I hope it changes the way you approach your trading activities.

Track Everything

Keeping records of everything will open your eyes. You’ll realize that you likely spend way more than you think you do at an average Grand Prix or PTQ. It also helps you to get into the mindset of using cash numbers for cards rather than retail, which is enormously useful when you’re trading.

The same goes for speculating. I’ve made some good speculations, as my 100 or so Zendikar fetchlands can attest to, but I’ve also got 94 Splinterfrights sitting on my desk reminding me that I screw up sometimes too. Being able to look back at my records for the last year ha shown me that my most profitable endeavors have involved trading heavily on my specs rather than buying in for cash, a realization that has kept me grounded this year.

For instance; I’ve got a nice stock of Human cards from Champion of the Parish to Silverblade Paladin that I suspect will go up after rotation. But rather than buy in for cash, I’m able to limit my exposure by getting in with trading.

Evaluation Spurs Improvement

The more you work at tracking your expenses, the better you’ll become at controlling them, and the more you evaluate your own successes and mistakes and what led to them the better prepared you are. This all contributes to your bottom line, and will help you be more efficient.

But outside of those tangible benefits, tracking and analyzing yourself brings a peace of mind. You no longer have to guess about how much you may have made on a particular weekend — You know exactly how you did. And that is a liberating feeling. It makes that trip to an expensive steakhouse with your Magic buddies on a trip a lot easier to stomach, and that steak will taste a little bit better knowing where you stand.

Thanks for reading,

Corbin Hosler
@Chosler88 on Twitter

(P.S. Let me know in the comments or on Twitter if this practice is something you guys would like to see more often. I’m attending Gen Con next week and would be happy to share with you my records and give you a live walk-through of my process, so to speak.)

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