In this guide
What separates traders who generate steady returns from those who merely tread water—or suffer losses—is rarely about forecasting ability alone. The real distinction lies in disciplined methodology and systematic execution. This guide outlines the core routines that successful market participants follow in their daily operations.
Before Entering Any Position
- Articulate your edge: What insight gives you an advantage over the broader market? Commit this reasoning to a single sentence before committing capital.
- Check the spread: Does the gap between buy and sell prices remain tight enough that your informational advantage can overcome trading friction?
- Assess liquidity: Will sufficient trading volume exist if you need to unwind the position at a reasonable price? Review the depth of available orders.
- Set your probability independently: Develop your own forecast before examining what others are pricing to prevent your thinking from becoming anchored to market consensus.
- Calculate position size: Apply the half-Kelly approach to sizing. Never risk more than 5% of total capital in any single trade, regardless of confidence level.
During Position Management
- Update on new information: As material events unfold (speeches, economic data, announcements), revise your forecast and determine whether to increase exposure, maintain your stake, or close the trade.
- Don't check obsessively: Intraday swings represent temporary noise rather than genuine shifts in fundamentals. Monitor your holdings once per day for markets with extended timeframes.
- Pre-define your exit criteria: Establish in advance the price level at which you will close a losing position. This removes emotion from the decision-making process.
After Each Market Resolves
- Record everything: Document the settlement date, market identifier, your forecast, your entry price, the final outcome, 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 you demonstrate stronger returns in geopolitical markets versus technology versus athletics?
- Review your losers honestly: Did the loss stem from flawed reasoning, or was it simply an unlucky outcome despite sound methodology?
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. Daily assessments tend to encourage excessive trading activity; monthly intervals allow 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 Excel, Google Sheets, or a Python script.
- How many markets should I research before entering each week?
- Depth of analysis matters far more than breadth of coverage. Conducting rigorous research on 3-5 opportunities typically yields better results than superficial examination of dozens.