In this guide
What separates traders who generate steady returns from those treading water or facing losses typically hinges on disciplined methodology rather than forecasting ability alone. This guide outlines the core routines that seasoned market participants follow during their trading day.
Before Entering Any Position
- Articulate your edge: What information or insight gives you an advantage the broader market lacks? Commit this to a single sentence before you commit capital.
- Check the spread: Does the gap between bid and ask prices remain tight enough that your advantage covers slippage and fees?
- Assess liquidity: Would you be able to unwind this holding at a reasonable price if circumstances demanded it? Examine the depth of available orders.
- Set your probability independently: Develop your own forecast in isolation before consulting market quotations, guarding against anchoring effects.
- Calculate position size: Apply the half-Kelly framework. Never risk more than 5% of total capital on a single trade, regardless of confidence level.
During Position Management
- Update on new information: When significant developments materialise (speeches, economic data, announcements), reassess your odds and decide whether to expand, maintain, or close your stake.
- Don't check obsessively: Intraday swings represent statistical noise. Monitor your holdings once per day for markets with longer timeframes rather than constantly.
- Pre-define your exit criteria: Establish the price level or circumstance at which you'll cut losses before you open the trade, removing emotion from the decision.
After Each Market Resolves
- Record everything: Document the settlement date, market identifier, your forecast, your entry price, the final result, and your gain or loss
- Score your calibration: Did events you assessed as 70% probable actually occur roughly 70% of the time?
- Categorize by market type: Do your returns vary across different sectors—political, digital assets, sporting events?
- Review your losers honestly: Did flawed reasoning lead to this loss, or did sound analysis simply encounter unfavourable variance?
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 most participants. Reviewing daily tends to encourage excessive trading; reviewing only monthly risks missing valuable feedback for adjustment.
- What software should I use to track prediction market trades?
- PolyGram's integrated portfolio management tools offer a solid foundation. For deeper analysis, export your trade data 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 matters more than breadth. Conducting rigorous due diligence on 3-5 opportunities typically yields better results than superficial examination of 20.