In this guide
What separates traders who achieve steady returns from those treading water or losing capital typically hinges on disciplined methodology rather than forecasting ability alone. This guide outlines the core routines that successful market participants follow during every trading session.
Before Entering Any Position
- Articulate your edge: What insight do you possess that remains unavailable to the broader market? Capture this reasoning in a single sentence prior to committing capital.
- Check the spread: Does the gap between buy and sell prices remain tight enough that your advantage justifies the trading cost?
- Assess liquidity: Would you be able to close this trade at a profit if circumstances demanded an immediate exit? Review the depth of available orders.
- Set your probability independently: Establish your forecast before examining current market valuations to sidestep the anchoring trap.
- Calculate position size: Apply the half-Kelly approach. Never allocate more than 5% of your total capital to any single trade, regardless of confidence level.
During Position Management
- Update on new information: Following significant developments (speeches, economic indicators, announcements), revise your forecast and determine whether to increase exposure, maintain your stake, or take profits.
- Don't check obsessively: Intraday swings represent statistical noise. For markets with longer timeframes, review holdings once daily rather than multiple times per hour.
- Pre-define your exit criteria: At what level will you cut losses if your thesis proves incorrect? Establish this threshold before opening the position to prevent emotion-driven choices.
After Each Market Resolves
- Record everything: Timestamp, market identifier, your forecast estimate, entry price, final outcome, realised gain or loss
- Score your calibration: Did your 70% probability calls resolve correctly roughly 70% of the time?
- Categorize by market type: Do your returns differ between political, digital asset, and sporting event markets?
- Review your losers honestly: Did you execute flawed reasoning, 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 works best for the majority of participants. Checking daily tends to encourage excessive turnover; checking only monthly allows correctable mistakes to compound.
- What software should I use to track prediction market trades?
- PolyGram's integrated portfolio dashboard provides a solid foundation. For more granular analysis, export your trade 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 due diligence on 3-5 opportunities tends to yield better results than superficial screening of 20 candidates.