In this guide
What separates traders who achieve sustained profitability from those who merely break even—or suffer losses—typically hinges on methodology rather than forecasting ability alone. This guide outlines the core disciplines that seasoned professionals implement during every trading session.
Before Entering Any Position
- Articulate your edge: What insight do you possess that the broader market has overlooked? Capture this reasoning in a single sentence prior to committing capital.
- Check the spread: Does the gap between bid and ask prices allow your informational advantage to overcome trading costs?
- 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: Establish your forecast before examining current market valuations to prevent anchoring to prevailing sentiment.
- Calculate position size: Apply the half-Kelly criterion. Restrict any single position to no more than 5% of total capital, irrespective of confidence level.
During Position Management
- Update on new information: Following significant developments (speeches, economic announcements, breaking news), reassess your forecast and determine whether to expand, maintain, or close your stake.
- Don't check obsessively: Intraday swings represent statistical noise. For markets with extended timeframes, review your holdings once daily rather than multiple times hourly.
- Pre-define your exit criteria: At what valuation will you liquidate if your thesis proves incorrect? Establish this threshold before initiating the trade to circumvent emotion-driven choices.
After Each Market Resolves
- Record everything: Document the settlement date, market identifier, your initial forecast, entry price, final outcome, and realised gains or losses.
- Score your calibration: Did events you assessed as 70% probable actually occur roughly 70% of the time?
- Categorize by market type: Do your returns vary meaningfully across political, digital-asset, and sporting prediction markets?
- Review your losers honestly: Did this 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 suits the majority of market participants. Evaluating daily tends to encourage excessive trading activity, whilst waiting a full month risks missing critical moments to adjust course.
- What software should I use to track prediction market trades?
- PolyGram's built-in portfolio tracker provides a solid foundation. For more granular performance measurement, export your transaction history as CSV and process it through spreadsheet applications or custom Python scripts.
- How many markets should I research before entering each week?
- Depth of analysis outweighs breadth. Conducting rigorous due diligence on 3-5 opportunities typically yields superior returns compared to conducting cursory examinations of 20 separate markets.