Arbitrage is a technique used in the stock market by large players who search (with powerful computers in real time) for price discrepancies from one market to another.For example, if they see dealers in London trading IBM stock at 1/8th pt lower than in New York, even if it’s only for a few seconds, they’ll grab it at the lower price and sell it in New York where they’ll make an 1/8th pt profit.Usually dealing in very large lots (100’s of thousands of shares) arbitrages are made possible by these kinds of short and infrequent ‘inefficiencies’ in the global marketplace.I’ve applied a modified version of this stock market method to eBay with excellent results. EBay is a huge marketplace, and even though it’s centrally located (in cyberspace) it is still a relatively ‘inefficient’ marketplace.There are several reasons for this- availability of detailed market information available to the participants is one major cause of this phenomenon.It’s better to specialize when it comes to buying and selling on eBay. Become an expert in ‘Zippo” lighters or rare books or whatever interests you most. Add depth to your knowledge, read more books, study anything related to your field- that way when you see a Zippo lighter with a tail like a fish and the person who listed it obviously missed this very important point in their description, you could end up owning it for very little money.Then you turn around and sell it on eBay again, for a nice profit because:

+ You recognized it’s true value,
+ Described it correctly,
+ Added better pictures, and
+ Generally instilled confidence in bidders that you know what you’re selling.

In other words, you have *added value* to the item by describing it more accurately and more knowledgeably than the previous seller.

That’s what I call the “eBay Arbitrage Strangle”.

Here’s a how I take advantage of eBay’s market on the BUY side of the trade:

Develop a list of “search terms” that will help you locate items you’re interested in. You will get suprising and great profit oppotunities by entering ‘missspelled’ words. One program I use to help me find misspellings on ebay is THE MISSPELLED EBAY SEARCH SYSTEM. The system not only FIND thousands of misspelled items with a click of a button, but also be notified via email THE SECOND an item is listed. It’s a must-have ebay tool.

Anyway, when I search for rare books on eBay I always have a list of terms, in a text file on my computer and all I have to do is ‘cut and paste’ those terms into eBay’s search window. When developing your list of terms, use terms that a person who didn’t know a thing about what they have listed would use. In my example above, with the Zippo lighter, search on “Zippo and fish tail”. Be obvious in your search terms.

When you find an item that you know you can make a profit on, bid early and enter the highest bid you would be willing to pay. Don’t ever go back and enter another bid. That’s a sure way to lose money. If you get it at your price or better, good! If not, and the item goes beyond your highest price, forget it and move on. It’s easy to have bids in on 50 to 100 items at one time- if you win 10 or 20 out of 100 you’re doing pretty good.

Here’s a summary of this profit opportunity:

Strategy: Buying low at one auction site like Yahoo auctions or Amazon’s Zshops and selling in another more active market (like eBay) for a premium.

Timing: The best time to use this strategy is when there are price discrepancies between the different auction sites. Generally slower markets with fewer bidders are the best places to buy- and more active markets with a larger number of bidders is the best place to sell.