In this guide
What separates traders who generate consistent returns from those treading water—or worse, losing capital—typically hinges on disciplined methodology rather than forecasting prowess alone. This guide outlines the core procedures that institutional-grade market participants follow during every trading session.
Before Entering Any Position
- Articulate your edge: What information or insight gives you an advantage over the broader market? Commit this to a single sentence prior to deploying capital.
- Check the spread: Does the gap between bid and ask prices remain sufficiently tight relative to your anticipated profit margin?
- Assess liquidity: Will you be able to unwind this exposure at a reasonable price if circumstances demand an exit? Examine the depth of available orders.
- Set your probability independently: Develop your forecast in isolation before observing quoted market levels, thereby preventing anchoring distortions.
- Calculate position size: Apply the half-Kelly criterion. Never exceed 5% of total capital in a single trade, irrespective of confidence level.
During Position Management
- Update on new information: As material events unfold (speeches, economic indicators, announcements), revise your forecast and determine whether to increase, maintain, or close the position.
- Don't check obsessively: Intraday price swings constitute statistical noise. For longer-dated contracts, once-daily monitoring suffices rather than constant observation.
- Pre-define your exit criteria: Establish the price level or condition at which you will liquidate if the market moves against you, doing so before entry to eliminate emotional interference.
After Each Market Resolves
- Record everything: Timestamp, contract name, your initial forecast, entry price, settlement result, realised gain or loss
- Score your calibration: Did your trades assigned 70% likelihood actually resolve favourably approximately 70% of the time?
- Categorize by market type: Do your returns vary across different domains—governance, crypto assets, athletics?
- Review your losers honestly: Did a flawed methodology produce the loss, or was the decision sound despite an unfavourable outcome?
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. Reviewing daily tends to encourage excessive trading activity; reviewing only monthly allows problems to compound.
- What software should I use to track prediction market trades?
- PolyGram's integrated portfolio management system provides a solid foundation. For more granular performance measurement, export your transaction log to CSV format 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 typically yields superior results than conducting cursory reviews of 20.