need help understanding rrt tsc stock trading

[kamchow]

i'm messing about with rrt tsc to see how it works (as far as my simple mind can comprehend such things!)

 

i'm having a bit of a problem understanding how stock buying and selling works.

let me explain...

 

i have player cash of $390.

the AI stock i want to buy is priced at $69.

i buy 1000.

the stock price has risen to $77.

i have $310 cash left.

 

next, the AI train pulls into a station.

the stock goes up to $86.

i sell the 1000 stock i have.

the stock price falls to $78.

i have $386 cash.

 

so, what i'd like to know is, what price am i buying and selling the stocks at?

did i buy the stocks at $69? at $77? or something in between?

did i sell the stocks at $86? at $78? or something in between?

 

is there a broker's fee for buying and selling?

if so, is it a fixed amount or does it vary?

 

if i assume that i bought the stock at $77, then there is a $3k fee being charged.

workings:

$390 - $310 = $80 (original cash minus what is left after buying stock)

$80 - $77 = $3 (cash spent on buying stock minus cost of stock, remainder is broker fee?)

 

if i assume i sold the stock at $78, then there is a $2k fee being charged.

workings:

$386 - $310 = $76 (cash i end with after selling stock minus cash i had after buying stock)

$78 - $76 = $2 (stock price at selling point minus cash i made from selling stock, remainder is broker fee?)

 

so, i made $1 on the stock going from $77 to $78 but lost $5 on broker's fees.

hence, $390 + $1 - $5 = $386

 

have i got that right?

or is there something else going on?

 

i did look at the manual and i did a number of internet searches for information regarding stock trading but i did not find anything giving exact workings/details.

 

if it has already been explained, please just point me towards that site and i'll digest the information there.

 

thank you for your help.

[kamchow]

am playing through another dry run.

here are the numbers...

 

cash at start $71.

AI stock $67.

i buy, price rises to $74.

have -$4 cash left.

 

train 1 pulls into station.

stock hits $84.

train 2 pulls into station.

stock hits $97.

i sell stock, it falls to $89.

cash left is $81.

 

so, if my above workings is correct, then $74 to $89 is $15.

takeaway fees ($3 for selling and $2 for buying) of $5.

leaving $10 profit.

 

from my initial $71, i end with $81.

ok so far but...

 

cash now at $83 (i assume it is interest that gave me the extra $2).

AI stock at $85.

i buy and it goes up to 94.

cash left -$13.

(err, is this right? $94 + $3 (fee) = $97. $83 cash to $97 is -$14!)

 

train 1 pulls into station.

stock rises to $102.

train 2 pulls into station.

prices rises to $112.

i sell, stock falls to $102.

cash left $85.

 

now, $94 (buying price) to $102 (selling price) is $8.

$8 minus $5 (brokers fee) = $3.

 

so, from my initial $83, add another $3 and i should have $86 left.

yet i see only $85!

 

this is what is puzzling me.

 

is there an exact formula being used or is it another "feature" of the game?

[Silverback]

I believe there IS an exact formula

BUT

only the game programmers would have known what this is. How accurately the game models the real world is also unknown .

 

I think the game internally hold its numbers to several decimal places but shows them on screen as rounded numbers so trying to work out the formulae exactly is difficult. I think is not a simple calculation.

 

The only way to know for sure would be to disassemble the code unless you can get hold of a copy of the source code.

[kamchow]

ok, thank you for that info.

i'm not going into the arcane world of code disassembly!

so, i'll just make sure the stock rises or drops by more than, say, $10 which should give me enough margin to make a profit.

[MaglevForever]

All I have on the stock market behavior are "best guesses" for the reasons that Silverback mentioned. As far as strategy for investment I tend to only rarely sell stock in my company during normal play. Most of the time I do this I expect to take a loss compared to what I would get from being invested while holding the stock long-term in my company which is hopefully growing. The circumstances I can think of when I would do a "trade" buy/sell and expect to make money are: if book value is going to have a relatively large % loss, if I have just achieved a spike in one year's profits that I have no way of sustaining the next, if the economics are really tight, or if an unforeseen loss like an expensive train breakdown puts books in the red. But, the AI are fair game since they aren't that reliable performers especially in the second century. I will tend to own none outright, but trade by buying/selling 2 to 5 thousand shares depending on the price and expected return. Sometimes I do sell for strategic reasons such as I described in my post about Elbow Room, selling out to buy into an AI. It's not my style, but some of the robber baron tricks, for example stop-trains rely heavily on selling and re-buying.

 

I believe stock prices are tied to book value. The standard company has 1.1M book value, if the company makes 300k that is 25% increase in book value and stock prices will rise at least that much in addition to the first year end rise given that the company now has a year's profit on the books. So the more stock you own as early as possible the better as long as prospects for growth are good. If you use some of the advanced tricks like holding the last hand of stock, book value starting at $0, book value will go up a great amount when a train arrives and costs in the meantime will decrease book value enough that trading in the stock/s is very profitable.

 

Something else to throw in the mix is the fact that price drops for every share you sell and rises for each share you buy, with this effect becoming stronger once a certain ownership threshold is reached (30%?). The exact formula is anyone's guess, unless a programmer enlightens us, but I tend to think the rise is a percentage of share value. This means that the more stocks outstanding the more price will rise if you buy them all. Even if I am wrong about the effect being a percentage of share value, the ownership threshold for the most part keeps me from trying trading strategies in my own company. I tend to focus on running a strong company instead, as I think this is a better use of effort overall. I am sure there are some great strategies though, so if you get adept at it that's great.

[jeffryfisher]

I believe stock prices are tied to book value.

 

I suspect that different formulae are used at different times. There's stock purchase, stock sale, train-arrival, there's end-of-month, and there's end-of-year. Moreover, purchase/sale in the market might be a different animal than company buy-back/sale on the finance page. Come to think of it, the AI player purchases and sales could even be a different code-path (therefore using their own unique equations).

[immpy]

I agree with Maglev that stock prices are tied to Company Book Value; and yet they are also tied to the company's debt to equity ratio. If your company has greater debt than equity and you experience a financial loss for the year as well, you will see the stock price fall greatly. And, of course, as stated in earlier posts, this is magnified to its' greatest extant in the early years of a company's existence. The stock prices I have experienced personally are amazing.....from $2 to as high as 1.1K for a share price...depending on the number of outstanding shares available for the company. Less shares creates the wildest stock price swings, which is why holding the last hand of stock (1000 shares) is a great wealth strategy if you can accomplish it. It will not only provide you with great personal wealth, by buying low and selling high, and then re-buying when low again, but if you can issue some stock when the share price is at or near one of these peaks, you will have a very nice addition of cash into your company to be used to finance your empire. This can be the veritable 'fountain of cash'. Check out the forum post topic 'Holding the last hand of stock' for more explanations of these techniques.

 

Enjoy your railroading.

[jeffryfisher]

To answer some of the other questions (and summarize):

1) Your price is the price it moved to, not the price you saw in the market before you moved it.

2) Yes, there is a brokerage fee.

These are good for the game because they mitigate pure market manipulation. One of my other games of the era, "Capitalism" suffered from failing to model market softness correctly.

[MaglevForever]

Jeffry, good post, finally giving a simple answer to the original question. I agree for the most part that the game prevents pure manipulation. However, holding-the-last-hand-of-stock, obviously cracks the game's defenses.

My explanation for this is kind of a response to immpy as well. In my view, debt or ratios thereof have nothing to do with stock price. Debt hides some assets from the game's stock pricing formula (they aren't included in book value), thus magnifying the effect of any earnings from those "hidden" assets on the visible portion of company assets (book value). Holding-the-last-hand-of-stock takes advantage of this almost completely by making visible assets (book value) almost zero. Then, even the expenses your company occurs due to maintenance, interest and fuel, etc., are enough of a comparative (in percentage terms) reduction that it is worthwhile to straight up "trade". Buying and selling shares often as the gains are much more lucrative compared to the weakened effects of the game's manipulation controls.

[immpy]

My explanation for this is kind of a response to immpy as well. In my view, debt or ratios thereof have nothing to do with stock price. Debt hides some assets from the game's stock pricing formula (they aren't included in book value), thus magnifying the effect of any earnings from those "hidden" assets on the visible portion of company assets (book value). Holding-the-last-hand-of-stock takes advantage of this almost completely by making visible assets (book value) almost zero. Then, even the expenses your company occurs due to maintenance, interest and fuel, etc., are enough of a comparative (in percentage terms) reduction that it is worthwhile to straight up "trade". Buying and selling shares often as the gains are much more lucrative compared to the weakened effects of the game's manipulation controls.

 

Superb explanation and clarification of the detrmining factors in stock share price Maglev. My lazy brain never bothered to dig deeper into what makes this thing tick. You have nailed it squarely on the head. I now stand properly corrected and enlightened. Great post!

[immpy]

I was quoting Maglev in the previous post, and then replied to his quote. Appologies for not being able to make the post show that clearly/