In this guide
What separates traders who generate steady returns from those treading water hinges primarily on disciplined methodology rather than forecasting acumen alone. This guide outlines the core operational standards that institutional-grade market participants follow throughout their trading day.
Before Entering Any Position
- Articulate your edge: What insight gives you an advantage over the broader market? Commit this reasoning to a single-sentence statement prior to executing any trade.
- Check the spread: Does the gap between bid and ask levels remain tight enough that your informational advantage justifies the cost of transacting?
- Assess liquidity: Will you retain the ability to unwind this holding at a favourable price if circumstances demand it? Examine the depth of available orders.
- Set your probability independently: Develop your forecast in isolation before examining market quotations, thereby preventing price anchoring from distorting your judgment.
- Calculate position size: Apply the half-Kelly criterion. Restrict individual exposure to no more than 5% of total capital regardless of confidence level.
During Position Management
- Update on new information: Following material events (speeches, economic indicators, announcements), revise your forecast and determine whether to expand, maintain, or liquidate the position.
- Don't check obsessively: Intraday volatility constitutes random variation. Monitor holdings once per day for markets with extended timeframes rather than multiple times hourly.
- Pre-define your exit criteria: Establish in advance the price threshold at which you will close the position if the market moves against you, thereby removing emotion from the decision.
After Each Market Resolves
- Record everything: Document the timestamp, contract identifier, your stated forecast, entry price, final result, and realised gain or loss
- Score your calibration: Did forecasts assigned 70% likelihood occur approximately 70% of the time in practice?
- Categorize by market type: Do your results demonstrate stronger performance in geopolitical versus digital asset versus athletic prediction segments?
- Review your losers honestly: Did the loss stem from flawed reasoning or from sound methodology undermined by unfavourable chance?
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 participants. Evaluating daily tends to encourage excessive turnover, whereas monthly intervals risk missing valuable adjustment opportunities.
- What software should I use to track prediction market trades?
- PolyGram's integrated portfolio monitoring system provides a solid foundation. For more sophisticated reporting, export transaction records as CSV and process through spreadsheet applications or scripting languages.
- How many markets should I research before entering each week?
- Depth of analysis outweighs breadth. Conducting rigorous examination of 3-5 opportunities typically yields superior returns compared to superficial review of dozens.