In this guide
What separates traders who generate steady returns from those treading water or falling behind hinges on disciplined methodology rather than forecasting ability alone. This guide outlines the core protocols that seasoned professionals follow during every trading session.
Before Entering Any Position
- Articulate your edge: What insight gives you an advantage that the broader trader community lacks? Commit this reasoning to a single sentence before executing any trade.
- Check the spread: Does the gap between buy and sell prices remain tight enough that your informational advantage outweighs the cost of transacting?
- Assess liquidity: Will you be able to unwind this position at a favourable price if circumstances demand it? Review the depth of available orders.
- Set your probability independently: Develop your own forecast in isolation, away from published market odds, to prevent anchoring to consensus.
- Calculate position size: Apply the half-Kelly criterion. Never risk more than 5% of total capital on a single trade, irrespective of confidence level.
During Position Management
- Update on new information: As significant events unfold (speeches, economic indicators, breaking news), reassess your forecast and determine whether to increase exposure, maintain, or close out.
- Don't check obsessively: Intraday volatility represents statistical noise. Monitor your holdings once per day for medium and long-dated contracts, not multiple times hourly.
- Pre-define your exit criteria: Establish the price level or circumstance at which you will liquidate a losing position before you commit capital. This prevents reactive, emotion-driven choices.
After Each Market Resolves
- Record everything: Capture the settlement date, contract description, your initial forecast, entry price, final outcome, and realised gain or loss
- Score your calibration: Did events you assessed as 70% probable actually occur roughly 70% of the time?
- Categorize by market type: Are your returns stronger in certain domains, such as political, digital asset, or sports markets?
- Review your losers honestly: Did the loss stem from flawed reasoning or from sound analysis that simply encountered 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 serves most traders well. Daily assessments encourage excessive turnover; monthly intervals allow problems to compound unchecked.
- What software should I use to track prediction market trades?
- PolyGram's integrated portfolio tracker provides a solid foundation. For more granular reporting, export your transaction history as CSV and process it through spreadsheet software or scripting languages.
- How many markets should I research before entering each week?
- Depth of analysis outweighs breadth. Conducting rigorous due diligence on 3-5 opportunities yields better outcomes than superficial examination of dozens.