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Coin Trading Fundamentals

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#1
Over the past year, I have expanded my range of collected coins to include not only commemorative coins but also classic US coins.

By no means do I claim to be an expert in coin trading. This guide is a work in progress. Over the last 4 years, I have gained some valuable knowledge in buying and selling coins on eBay, and this knowledge has begun to reap rewards over the past year.

There are 3 main fundamentals of coin trading upon which this guide is based:

1) Nearly any coin can be a money maker, as long as there is a collector base for the coin. Price is all that matters.

2) Both buyer and seller must have a good way to verify that each coin is indeed the coin being advertised.

3) Buying coins should be balanced between the goals of making a profit and of having certain coins in one's collection.


These are the basic fundamentals of coin trading. I hope to follow up with additional posts detailing the specifics of these fundamentals.
 
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1) Nearly any coin can be a money maker, as long as there is a collector base for the coin. Price is all that matters.
Following this principle isn't the same as being greedy.

It is simply saying to oneself that instead of trying to buy a coin of a certain type, date, and mint mark, one looks for a range of types, dates, and mint marks, while making sure that the price paid for that coin is low enough.

Online sales, particularly on eBay, are often conducted through bidding at auctions. When there are multiple bidders for a single coin, the price of that coin increases whenever the bidders are more interested in the coin.

By looking over a wide range of coins, rather than a few, you give yourself the opportunity to find a lower price for a coin whose price has not yet increased that high from bidding.
 

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#3
Please, I am not trying to argue with your very good explanation, analysis and results. I hope you wont mind if I add this bit of warning for those that might be tempted to vary from your approach and fall for some of the slick boiler plate coin sales people

WARNING: Shady “Rare” Coin Dealers Are Circling Like Vultures

By Clint Siegner
Nervous investors have been pouring into the gold and silver markets over the past two months.
Money Metals Exchange is proud to have helped almost 20,000 new customers with a precious metals purchase in recent weeks, many of whom came over from other dealers struggling with inventory shortages and ridiculous delivery delays.

A new wave of investors is getting the message; the Federal Reserve will never stop printing currency units and punishing savers with lower interest rates, Congress will never put deficits under control, and the government-terminated U.S. economy may not recover for years.
For most clear-eyed investors, it is time to batten down the hatches.
Lots of them are diversifying into precious metals.
Unfortunately, shady coin dealers are out in force, trying to capitalize on this situation. We can see it in the proliferation of these dealers advertising on TV and radio with their celebrity spokesmen.
If investors pick up the phone and call one of these outfits, they could get severely punished for making an otherwise good decision.
Deciding to buy some gold and silver as a safe-haven makes a ton of sense. However, plenty of people with sound intentions will call the wrong dealer and let some high-pressure salesperson convince them to buy dubious “rare,” “graded,” or “proof” coins.
Instead of betting on gold and silver bullion as a safe haven, they find themselves gambling in the highly speculative and illiquid numismatic market. The winners are usually just the dealers selling coins for 2-3 times what their precious metal content is really worth.
There is zero reason to buy numismatic coins – unless you are an experienced collector. If you are an investor or someone simply looking to preserve wealth, the price-transparent bullion market is where you want to be. Don’t let yourself get derailed, regardless of how smooth or insistent the sales pitch may be.
Here are some red flags to watch out for:
  • The salesperson gives you some story about why you should avoid bullion and buy collectible coins instead.

  • The salesperson claims numismatic coins have tax advantages, asserts that only bullion can be confiscated, or claims numismatic coins will outperform bullion as an investment. These are all nonsense. (You are guaranteed immediate confiscation through the high premiums on "rare" coins.)

  • The salesperson calls regularly and uses pressure techniques.

  • The dealer claims to have a “super hot buy” and that if you don’t grab it immediately, someone else will.

  • You are told the resale value is higher than the current purchase price, as if the salesperson is really going to sell coins for a loss.

  • The dealer doesn’t publish bid prices – the price they pay to buy coins from clients. The bid will often be 30% to 50% less, if they'll buy items back at all.
The key to making a good investment in precious metals is to buy highly liquid bullion coins, rounds and bars at low premiums. And also choose a dealer you can count on to deliver quickly and reliably.
Investors who stick to these simple guidelines will be well positioned for the dual threat of inflation and economic turmoil.
They won’t start way underwater because the coins they bought were vastly overpriced. They also won’t be stuck having to find some greater fool to buy their “rare” coins when the time comes to sell – a problem which may be compounded if hard economic times reduce the number of people buying luxuries like collectible coins.
 

Buck

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how about the salesman who tells you to buy bullion rather than rare coins because everyone wants bullion and he sells you fake bullion?

Look out for fakes and overpriced numismatics AND bullion
 

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Please, I am not trying to argue with your very good explanation, analysis and results. I hope you wont mind if I add this bit of warning for those that might be tempted to vary from your approach and fall for some of the slick boiler plate coin sales people
Thanks...this guide to coin trading is written as much for others as it is for myself.

I am writing this guide to help crystallize the knowledge I gained in this area over the last few years.

The key to making a good investment in precious metals is to buy highly liquid bullion coins, rounds and bars at low premiums. And also choose a dealer you can count on to deliver quickly and reliably.
Investors who stick to these simple guidelines will be well positioned for the dual threat of inflation and economic turmoil.
They won’t start way underwater because the coins they bought were vastly overpriced. They also won’t be stuck having to find some greater fool to buy their “rare” coins when the time comes to sell – a problem which may be compounded if hard economic times reduce the number of people buying luxuries like collectible coins.
The fundamentals of coin trading apply to low-premium coins as well as high-premium. I have seen many situations where NGC-certified coins sold at near-melt prices, either by auction or sale, with premiums comparable to bullion coins at online dealers (this applies especially to slabbed commemorative gold coins). When taking eBay bucks and credit card bonuses into account, these prices can sometimes even be below melt.

This topic is a good opportunity for me to bring up what I wanted to say about the transformation of the coin market beginning in the 21st century. Back in the 20th century, coin shops were the primary marketplace for coins, and the coin shop owners always had the upper hand. Nowadays, with online markets like eBay, retail buyers can also become sellers themselves, without suffering much of a handicap. The wide range of prices makes it possible to profit by coin trading, even considering the fees charged by eBay, which are small compared to the losses incurred by buying from and selling to a traditional coin shop. Furthermore, the wide proliferation of NGC and PCGS slabs makes transactions much more reliable, ensuring both authenticity and grade accuracy without requiring much expertise.
 

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These are the basic fundamentals of coin trading. I hope to follow up with additional posts detailing the specifics of these fundamentals.
looking forward to your future posts on the specifics. where do you like to fish - the old money coins, the older commems, the new commems, fancy bullion? i have a few issues that i look for, but they rarely come up for sale
 

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#7
Look out for fakes and overpriced numismatics AND bullion
I remember when only ONE authenticator slabbed SAEs, GAEs, and...bullion coins. Back then it was seen as a marketing ploy to scam more money out of neophytes.
But now even slabs are being counterfeited.
DYODD
 

Buck

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I remember when only ONE authenticator slabbed SAEs, GAEs, and...bullion coins. Back then it was seen as a marketing ploy to scam more money out of neophytes.
But now even slabs are being counterfeited.
DYODD
plenty of people are 'buying the slab' and that makes sales easy...but, while selling on ebay, I get the occasional cherry picker who asks me to describe the condition of the 70 coin inside...I don't waste any attempts at doing that and some will buy the coin only to return it because it's 'not a real 70'...

and I keep 10% for restocking when a cert coin comes back...
 

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looking forward to your future posts on the specifics. where do you like to fish - the old money coins, the older commems, the new commems, fancy bullion? i have a few issues that i look for, but they rarely come up for sale

Last year, I started looking at the older half dollar commemoratives and walking liberty half dollars. After going through many auctions on eBay, I realized that in a few cases I got very lucky deals on some auctions with very little effort.

When I sold one of those coins for a profit, that's when I realized that there may be a method to finding those great deals. I looked to expand my collection by going for some of the $10 and $20 gold coins, standing liberty quarters, and Morgan dollars. As I looked at more and more types of coins, I became more comfortable with pricing them in auctions and placing bids that would give me favorable prices as a buyer.

There are a few questionable purchases over the past year that bug me, but luckily they were small mistakes. Those questionable purchases motivated me to improve my pricing methodology for buying coins. My current methodology uses the auction history from the PCGS website. I plan to describe this methodology in more detail when I have the time, but it has worked very well for me over the past several months.
 

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Let me tell about my online coin trading experience.

I started collecting modern $5 gold commemoratives and $5 liberty gold coins 4 years ago on eBay, always looking for NGC-slabbed coins so that I could verify them online. I lost many, many auctions, but in doing so I realized that nothing was actually lost in those auctions. The only way one can truly lose an auction is by paying too high a price for a coin.

When the 2016 National Park $5 coin approached the end of the year with a very low mintage, I decided to try buying some coins directly from the Mint. I placed orders in National Park, Boys Town, Breast Cancer, and American Legion coins in the years they were minted, and they all ended with very low mintage.

But it was really the National Park half dollar that started my interest in selling coins. When I sold a few of them on eBay, I planned to make some submissions to NGC on my own to sell slabbed commemorative coins. The 2018-d Breast Cancer half dollar at MS70 turned out to be a big winner. I sold a few of those and still have a few in my collection.

Last year, I made some great buys in the 2019-w Legion unc $5 gold coin, which became the key coin in its series, but I haven't yet sent them for grading. Things were looking great when the new year 2020 started, until I realized that the Mint increased their prices across the board on all their products. My cycle of buying coins from the Mint, grading them, and then selling them on eBay was severely disrupted.

Locked in at home due to the COVID-19 pandemic, I have been spending a lot of my spare time trying to find a way to counteract the Mint's price increase, and I decided that smart buying of certified coins on eBay was the best way to move forward as a coin trader.

While looking for coins, I have realized that there are many great deals available in old coins as well as new ones. The journey has just begun.
 

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Buck

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Mexico and it's coins have a very colorful history with rare issues that were restruck a few decades later, revolutions every so often, etc...

the interest in Mexico coins, or lack there-of, makes for some very good quality coins being available at relative inexpensive prices

I've got a friend who collected Mexico coins decades ago, he's making a small fortune selling them now...
 

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#13
let's see if I can keep this short:

Another thing noticed when 'label chasing':
PCGS (and NGC), First Strikes (ER ((not the early NGC FS's)), be aware of how PCGS will issue First Strike designation to ASE's based upon the shipping label on a Master Box

So, I purchased lots of 2003 PCGS First Strike ASE's many years ago for a 'bargain' price...I wouldn't / couldn't go wrong (and I haven't) but,,,BUT

I 'also' purchased them because at the time, 2015(?), there were only 5K of them on PCGS's population chart and there were only 133 graded MS70, the bulk of the rest were 69's...

Today, there are 7.6k total certified and there are 212 graded MS70...

The decision to utilize the shipping label date leaves populations on First Strike labeled coins 'open', WIDE OPEN...quite literally, PCGS destroyed their own program by becoming greedy and BTW, their grading sucks, it truly is bad...they are not #1 when they sell their services and simply slab everything as 69...they have plenty of people fooled...but, that's my opinion and it's a good thing there are the ignorant in the world because PCGS needs the customers

 
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#14
Coin trading fundamentals are nothing secret; and they are just like jockeying used cars, flipping houses, rummaging through a garage sale or antique store—you look for something with a value greater than the cost. As you do, you grow in knowledge and experience. It is an opportunistic activity, and one where flexibility becomes a key: when bullion is down, you look for numismatic opportunities, and vice versa.

For example, I quit collecting Lincoln cents a long time ago, because some coins in my collection had corrosion spots that developed over many years (decades, in fact). However, when I was at an auction four months ago, a nearly complete set of Lincolns from 1909-1940, along with some miscellaneous coins, came across the block. The collection was missing only a 14-D and 31-S. I was going to bid up to $500 or so, as just the 09-S VDB (in Fine condition—full wheat lines) is worth more than that. I got the lot for $485.

It pays to have some basic knowledge, as I did with the Lincolns; and the more experience you have, the better chance you have at working on a “hunch.” A hunch can easily be backed up with some quick research on the net.

So PAY ATTENTION and BE OPPORTUNISTIC. Those are the key fundamentals.
 

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it's like an art form...as the 'buyer', you need to have a taste that's just a bit different than others yet, nearly close enough so you can create an 'exit strategy' for what you hunted for...

You have to be both artistic in your process yet pragmatic enough to know when to say No Thank You...

something i've noticed:
I've run into plenty of dealers who'll allow money to 'walk away' because they don't know how to 'close a deal'

Value is something that is fluid and on occasion, there's a time and a place to 'let go' of 'older stock', perhaps at a loss, averaging in that loss with all your other stuff should never be an issue, but, that 'older stock' has to be liquidated to free up the capital to make a wiser, more valuable purchase...and there you have 'your money back' but some people don't have that knack...some will hold onto something long beyond their death. and if that's the purpose of collecting, that's one thing, me, what ain't going for the kids will be slowly sold to accommodate my needs.

Grow THAT habit, move in that direction, remain flexible and have patience...customer service and a good honest attitude, and you'll do just fine across the decades of your involvement in the 'hobby'

after all, there's no real reason to just Buy and Hold everything...

 

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#16
Great comments above.

I will be looking into coins from Mexico. I have noticed that their silver bullion coins have become popular in recent years. I may also pivot my focus of NGC submissions toward foreign bullion coins from countries like Mexico and Australia.

And I will consider selling some of my "older stock" before it turns bad.
 

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#17
Price is all that matters.

Prices are a part of all aspects of our world, and coin trading is no exception.

As a buyer you seek to buy each coin at a low price, and as a seller you seek to sell each coin at a high price, to the extent that you can still complete the purchase or sale of the coin.

Coin trading is different from the trading of bullion, commodities, cryptocurrency, or stocks, in that the prices of coins are far more variable at any given point of time. As a coin trader, you are not held hostage to the current market price of the coin you are trying to buy or sell. Rather, the market price of that coin is negotiable, which means that the final price of the sale is negotiated by the parties taking part in the sale.

In the 21st century coin trading world, online sales provide the most favorable pricing for typical buyers and sellers of coins. This is because the online platform (eBay, for example) essentially replaces the middleman that was the coin shop in the 20th century coin trading world, greatly reducing the amount of monetary loss going to the middleman.

In online platforms, there are different types of sales, including auctions and buy-it-now sales. Auctions generally provide the most favorable pricing for buyers, whereas buy-it-now sales generally provide the most favorable pricing for sellers. This is because buyers participating in auctions have a limited amount of time to find and properly price the coins being auctioned.

Since your pricing goal will be different as a buyer and a seller, it is advantageous to have entirely opposite strategies for pricing coins as a buyer versus a seller.

To gain the most advantage from the potentially low prices of auctions, one needs to have an accurate picture of what is a good price for a coin being auctioned.
 

Buck

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#18
i'll add:
Watch Current Prices, as they fluctuate on numismatic items as well...and values are Up!

it's advantageous to have a price range to target, either buying or selling and 'knowledge of the product' is paramount to setting a proper price range, either way

and, i've sold things at 'a loss' because i could 'circulate my money', and i 'price average'...so, i really never lose anything...as, ultimately, the more I sell, the cheaper everything else becomes...
 

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#19
Tip Of The Day


Never try to force a deal through.

Opportunities, however promising they may look, are just that. Take every opportunity as a possible deal but not a commitment.

In eBay auction terms, this means determining an acceptable buy or sell range and sticking to it, even when last minute circumstances begin to say otherwise.

Problems in the coin should be identified early so that last minute changes in price can be avoided.
 

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Tip Of The Day


Never try to force a deal through.

Opportunities, however promising they may look, are just that. Take every opportunity as a possible deal but not a commitment.

In eBay auction terms, this means determining an acceptable buy or sell range and sticking to it, even when last minute circumstances begin to say otherwise.

Problems in the coin should be identified early so that last minute changes in price can be avoided.
This is good advice in any auction situation.
I use to go to estate auctions where coins or nice jewelry was being offered. One I went too one about 20+ years ago that had a 1/4 T.oz A.G.E. Gold was about $400.00 T.oz then. The simple math tells you the coin had a value of $100.00. I went to $110.00 on my last bid. The bid kept going up. So much so that I got up out of my seat walked to the front and looked at the 1/4 "ounzer" again. Yep One-Quarter of a T.oz. AGE.
By the time I got back to my seat the bid hit $150.00. It was finally "hammered' at $175.00. Any coin shop in America would have been glad to sell you at retail at $125.00+/-.
"AUCTION FEVER"
Know your price and know when to let go. There will be other fish in the sea.
I ended up scoring on silver dollars and halves at the same auction nobody wanted.