In this guide
What separates traders who generate steady returns from those who merely break even—or worse, lose capital—is rarely about forecasting skill alone. Disciplined methodology and systematic execution are the real differentiators. This guide outlines the core disciplines that successful market participants follow in their daily operations.
Before Entering Any Position
- Articulate your edge: What insight do you possess that the broader market has overlooked? Commit this reasoning to a single sentence before committing capital.
- Check the spread: Does the gap between bid and ask prices remain tight enough that your informational advantage covers slippage and fees?
- Assess liquidity: Will you be able to liquidate this holding at a reasonable price if circumstances demand an exit? Examine the depth of available orders.
- Set your probability independently: Establish your own forecast without reference to current market quotations, thereby insulating yourself from anchoring effects.
- Calculate position size: Apply the half-Kelly criterion. Never risk more than 5% of total capital on any single trade, irrespective of confidence level.
During Position Management
- Update on new information: As significant events unfold—such as campaign developments, polling shifts, debate schedules, or official announcements—recalibrate your forecast and determine whether expansion, retention, or closure is warranted.
- Don't check obsessively: Intraday volatility represents statistical noise rather than meaningful signal. For markets with extended timeframes, once-daily monitoring suffices.
- Pre-define your exit criteria: Establish in advance the price level at which you will close a losing position. This removes emotion from the exit decision.
After Each Market Resolves
- Record everything: Document the settlement date, market identifier, your initial forecast, entry price, final outcome, and realised gain or loss.
- Score your calibration: Did forecasts assigned 70% probability prove correct approximately 70% of the time across your portfolio?
- Categorise by market type: Do your returns vary systematically across different sectors—for instance, election forecasting versus commodity or technology markets?
- Review your losers honestly: Distinguish between flawed methodology and unfavourable outcomes despite sound reasoning.
Weekly Review Routine
- Reconcile all open positions and cumulative profit-and-loss figures
- Calculate rolling 30-day and 90-day Brier scores
- Survey the upcoming schedule for significant events (central bank announcements, electoral contests, key economic indicators)
- Detect any recurring patterns or systematic errors in your recent decision-making
- Adjust portfolio composition and risk allocation as appropriate
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 correctable mistakes 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 reporting, export your transaction history as CSV and process it using spreadsheet applications or scripting languages.
- How many markets should I research before entering each week?
- Depth of analysis matters far more than breadth. Rigorous examination of 3-5 opportunities typically yields superior returns compared to superficial review of dozens.