In this guide
What separates consistently winning prediction market traders from those treading water or facing losses typically hinges on methodology rather than forecasting ability alone. This guide outlines the core disciplines that seasoned professionals implement during every trading session.
Before Entering Any Position
- Articulate your edge: What insight do you possess that the broader market hasn't yet priced in? Commit this to a single sentence prior to executing any trade.
- Check the spread: Does the gap between bid and ask prices remain tight enough that your informational advantage outweighs the cost of transacting?
- Assess liquidity: Will you have sufficient market depth to unwind your stake at a reasonable price if circumstances demand it? Examine the order book carefully.
- Set your probability independently: Establish your own forecast before examining what the market is currently quoting, thereby protecting yourself from anchoring to prevailing prices.
- Calculate position size: Apply the half-Kelly criterion. Never allocate more than 5% of total capital to any single position, irrespective of your confidence level.
During Position Management
- Update on new information: Following material developments (speeches, economic data, breaking news), reassess your forecast and determine your next move—whether to expand, maintain, or reduce exposure.
- Don't check obsessively: Intraday volatility constitutes largely random noise. For markets with extended timeframes, review your holdings once daily rather than multiple times per hour.
- Pre-define your exit criteria: Before you commit capital, establish the price threshold at which you will exit if your thesis proves incorrect. This discipline prevents emotion-driven reversals.
After Each Market Resolves
- Record everything: Document the timestamp, market identifier, your forecast, the price you entered at, the final outcome, and your realised gain or loss.
- Score your calibration: Did events you assessed as 70% probable actually occur roughly 70% of the time across your historical trades?
- Categorize by market type: Do you demonstrate stronger returns when trading political events versus technology versus sporting contests?
- Review your losers honestly: Did this loss stem from flawed reasoning or was it simply an unlucky outcome despite sound methodology?
Weekly Review Routine
- Reconcile all positions and P&L
- Calculate rolling 30-day and 90-day Brier scores
- Review upcoming calendar events (Fed meetings, elections, major data releases)
- Identify any systematic biases in your recent trading
- Rebalance portfolio allocation if needed
FAQ
- How often should I review my prediction market performance?
- A weekly cadence suits the majority of traders. Reviewing daily tends to encourage excessive trading activity; reviewing only monthly allows problems to compound before correction.
- What software should I use to track prediction market trades?
- PolyGram's built-in portfolio tracker offers a solid foundation. For more granular performance metrics, export your trade history as CSV and process it through Excel, Google Sheets, or a Python script.
- How many markets should I research before entering each week?
- Depth of analysis outweighs breadth. Conducting rigorous research on 3-5 opportunities tends to generate superior returns compared to performing cursory due diligence across 20 different markets.