In this guide
What separates traders who generate steady returns from those treading water (or worse) is typically rigorous methodology rather than forecasting acumen alone. This guide outlines the core disciplines that seasoned market participants follow in their daily operations.
Before Entering Any Position
- Articulate your edge: What insight gives you an advantage that other participants lack? Commit this to a single sentence before you commit capital.
- Check the spread: Is the gap between bid and ask prices tight enough that your informational advantage justifies the cost of trading?
- Assess liquidity: Will you be able to unwind this position at a favourable price if circumstances demand it? Examine the depth of available orders.
- Set your probability independently: Establish your own forecast first, before observing what the market is pricing, to sidestep anchoring effects.
- Calculate position size: Apply the half-Kelly criterion. Never risk more than 5% of your total capital on a single trade, regardless of confidence level.
During Position Management
- Update on new information: When significant events materialise (speeches, statistics, announcements), reassess your forecast and decide whether to expand, maintain, or close your stake.
- Don't check obsessively: Intraday swings represent statistical noise. For markets with longer timeframes, review daily rather than by the hour.
- Pre-define your exit criteria: Establish your stop-loss price or loss threshold before you enter, preventing emotion from hijacking your decisions later.
After Each Market Resolves
- Record everything: Capture the entry date, market identifier, your forecast, the price you paid, the final outcome, and your gain or loss.
- Score your calibration: Did events you assessed at 70% confidence materialise roughly 70% of the time?
- Categorize by market type: Do your returns vary significantly across political, digital asset, or sporting event categories?
- Review your losers honestly: Did the loss stem from flawed reasoning or sound logic that simply didn't play out?
Weekly Review Routine
- Reconcile all open positions and cumulative returns
- Calculate rolling 30-day and 90-day Brier scores
- Survey the calendar for upcoming pivotal events (central bank announcements, ballot initiatives, significant economic indicators)
- Spot any recurring patterns or blind spots in your recent activity
- Adjust your portfolio composition if warranted
FAQ
- How often should I review my prediction market performance?
- A weekly cadence works best for the majority of traders. Examining results daily encourages excessive trading; waiting until month-end allows valuable corrections to slip away.
- What software should I use to track prediction market trades?
- PolyGram's integrated portfolio dashboard provides a solid foundation. For more granular insights, export your transaction history as CSV and process it using spreadsheet software or a programming language like Python.
- How many markets should I research before entering each week?
- Depth of analysis matters more than breadth. Thoroughly studying 3-5 opportunities typically yields better results than superficially reviewing dozens.