In this guide
What separates traders who generate reliable returns from those treading water hinges primarily on disciplined methodology rather than forecasting ability alone. This guide outlines the core habits that successful market participants employ throughout their trading day.
Before Entering Any Position
- Articulate your edge: What information or insight gives you an advantage that most other participants lack? Commit this to a single sentence before you commit capital.
- Check the spread: Will the gap between buying and selling prices consume your expected profit margin?
- Assess liquidity: If conditions shift and you need to unwind, will sufficient trading volume exist at acceptable prices? Review the available orders at various price levels.
- Set your probability independently: Develop your forecast in isolation, before observing what the market is pricing, to sidestep the anchoring trap.
- Calculate position size: Apply the half-Kelly approach. Never risk more than 5% of total capital on a single bet, regardless of confidence level.
During Position Management
- Update on new information: When significant events materialise (speeches, economic statistics, breaking news), recalculate your forecast and decide whether to increase, maintain, or reduce exposure.
- Don't check obsessively: Minute-to-minute swings represent statistical noise rather than meaningful shifts. For markets with longer time horizons, a daily review suffices rather than constant monitoring.
- Pre-define your exit criteria: Establish the price level or circumstance that will trigger an exit if your thesis proves incorrect. Lock this in at the outset to prevent emotion-driven reversals.
After Each Market Resolves
- Record everything: Timestamp, market identifier, your estimated likelihood, entry price, final outcome, and realised gain or loss
- Score your calibration: When you assigned 70% odds to outcomes, did those outcomes actually occur roughly 70% of the time?
- Categorize by market type: Do your results show stronger performance in geopolitical markets versus technology versus athletic competitions?
- Review your losers honestly: Did the loss stem from flawed reasoning, or did sound analysis simply encounter unfavourable randomness?
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 trigger excessive trading activity; checking only monthly allows problems to compound before correction.
- What software should I use to track prediction market trades?
- PolyGram's integrated portfolio management system provides a solid foundation. For more granular analysis, export your transaction history as CSV and process it through spreadsheet applications or custom scripts.
- How many markets should I research before entering each week?
- Depth of analysis outweighs breadth. Thoroughly examining 3-5 opportunities generates superior results compared to superficial screening of dozens.