In this guide
What separates traders who generate steady returns from those treading water or facing losses is fundamentally about methodology and discipline, not merely forecasting accuracy. 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 rationale to a single sentence prior to executing any trade.
- Check the spread: Does the gap between bid and ask prices allow your edge to survive the cost of transacting?
- Assess liquidity: Will you be able to unwind this position at a favourable price if circumstances demand it? Examine the depth of available orders.
- Set your probability independently: Establish your own forecast in isolation, before consulting market quotations, to prevent anchoring to prevailing prices.
- Calculate position size: Apply the half-Kelly criterion. Never risk more than 5% of total capital on any single trade, regardless of confidence level.
During Position Management
- Update on new information: When significant events materialise (speeches, economic reports, announcements), reassess your forecast and decide whether to increase, maintain, or close your stake.
- Don't check obsessively: Intraday price swings represent statistical noise. For markets with extended timeframes, review once daily rather than multiple times hourly.
- Pre-define your exit criteria: At what price level will you cut losses if your thesis proves incorrect? Establish this threshold in advance to sidestep emotionally-driven choices.
After Each Market Resolves
- Record everything: Timestamp, market name, your forecast, entry price, final outcome, realised gain or loss
- Score your calibration: Did events you assessed as 70% probable actually occur 70% of the time?
- Categorize by market type: Are your returns stronger in geopolitical markets compared to technology or sporting events?
- Review your losers honestly: Did you execute poor reasoning, or did sound methodology 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. Reviewing daily encourages excessive turnover; reviewing monthly allows correctable mistakes to compound.
- What software should I use to track prediction market trades?
- PolyGram's integrated portfolio management system offers a solid foundation. For more sophisticated performance measurement, export your transaction records as CSV and process them through Excel, Google Sheets, or a Python script.
- How many markets should I research before entering each week?
- Depth of research outweighs breadth. Conducting rigorous analysis on 3-5 carefully selected markets typically yields superior returns compared to superficial examination of dozens.