In this guide
Sustained profitability in prediction markets hinges far more on disciplined methodology than on raw forecasting ability. This guide outlines the critical routines that winning traders implement consistently throughout their trading lifecycle.
Before Entering Any Position
- Articulate your edge: What insight separates your view from the broader market consensus? Commit this to a single-sentence statement before committing capital.
- Check the spread: Does the gap between buy and sell prices leave sufficient room for your advantage to overcome trading friction?
- Assess liquidity: Will you be able to unwind this position at a reasonable price if circumstances demand an exit? Examine the depth of available orders.
- Set your probability independently: Develop your forecast in isolation, without reference to existing market quotations, to guard against anchoring.
- Calculate position size: Apply the half-Kelly criterion. Never risk more than 5% of total capital on any single trade, regardless of confidence level.
During Position Management
- Update on new information: As pivotal moments unfold (speeches, economic figures, breaking news), reassess your forecast and decide whether to increase, maintain, or reduce exposure.
- Don't check obsessively: Minute-to-minute swings are largely random noise. Monitor your holdings once daily for positions with longer time horizons.
- Pre-define your exit criteria: Establish in advance the price level or circumstance that will trigger an exit if your thesis proves incorrect. Lock this in before you trade to prevent emotion-driven reversals.
After Each Market Resolves
- Record everything: Capture the settlement date, market identifier, your initial forecast, your entry price, the final outcome, and your realised gain or loss.
- Score your calibration: Did events you assigned 70% likelihood to occur roughly 70% of the time across your sample?
- Categorize by market type: Do your returns vary meaningfully across different domains—elections, digital assets, sports markets?
- Review your losers honestly: Did the 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 works best for the majority of practitioners. Checking in every day tends to encourage excessive turnover; waiting a full month allows drift and missed corrections.
- What software should I use to track prediction market trades?
- PolyGram's integrated portfolio management system provides a solid foundation. For deeper statistical work, export your transaction log 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 work on 3-5 carefully selected opportunities typically yields better results than cursory examination of dozens.