In this guide
What separates traders who generate steady returns from those treading water or posting losses is rarely raw forecasting talent—it's rigorous methodology. This guide outlines the core disciplines that institutional and professional traders follow during every trading session.
Before Entering Any Position
- Articulate your edge: What insight do you possess that the broader market has overlooked? Commit this to a single sentence before committing capital.
- Check the spread: Does the gap between bid and ask prices leave room for your advantage to materialise after fees?
- Assess liquidity: Will you be able to unwind this position at a reasonable price should circumstances demand it? Review the depth of available orders.
- Set your probability independently: Establish your own forecast in isolation, prior to observing quoted market odds, to prevent cognitive anchoring.
- Calculate position size: Apply the half-Kelly criterion. Never risk more than 5% of total capital on any single bet, regardless of confidence level.
During Position Management
- Update on new information: When significant events unfold (public debate, economic statistics, breaking news), reassess your forecast and determine your next move—expand, maintain, or liquidate.
- Don't check obsessively: Minute-to-minute swings are statistical noise. For markets with extended timelines, a daily check suffices; hourly monitoring invites poor decisions.
- Pre-define your exit criteria: Establish the price level at which you will close if the market moves against you. Decide this threshold before you open the position to sidestep emotion-driven exits.
After Each Market Resolves
- Record everything: Document the date, market identifier, your forecast, your entry price, final outcome, and realised gain or loss.
- Score your calibration: Did forecasts you labelled 70% probable come true roughly 70% of the time?
- Categorise by market type: Do your returns vary across political markets, digital assets, or athletic contests?
- Review your losers honestly: Did a flawed methodology produce this loss, or did sound reasoning 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 the majority of participants. Reviewing daily tends to encourage excessive turnover; reviewing only monthly leaves gaps where corrective action could have helped.
- What software should I use to track prediction market trades?
- PolyGram's integrated portfolio monitoring system provides a solid foundation. For deeper statistical analysis, export your transaction 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. Rigorous examination of 3-5 opportunities typically yields better results than cursory glances across 20 different markets.