In this guide
What separates sustained winners from break-even or underwater prediction market participants is rarely raw forecasting talent alone—it is disciplined methodology. This guide outlines the core operational standards that institutional and professional traders follow daily.
Before Entering Any Position
- Articulate your edge: What information asymmetry or analytical advantage do you possess that the broader market has overlooked? Commit this to a single statement before deploying capital.
- Check the spread: Does the width of the bid-ask spread consume a material portion of your anticipated profit margin?
- Assess liquidity: Will sufficient counterparty interest exist if you need to unwind this position at a reasonable price? Examine the depth of available orders.
- Set your probability independently: Develop your forecast estimate in isolation, prior to observing quoted market prices, to circumvent anchoring effects.
- Calculate position size: Apply the half-Kelly criterion. Maintain a ceiling of 5% of total capital allocation per individual position, irrespective of confidence level.
During Position Management
- Update on new information: Following material developments (speeches, economic announcements, breaking news), reassess your forecast and determine whether to increase, maintain, or reduce your stake.
- Don't check obsessively: Intraday volatility constitutes random variation rather than signal. Monitor holdings once daily for markets with extended settlement timelines.
- Pre-define your exit criteria: Establish the price threshold at which you will close the position if the market moves against you. Lock in this decision beforehand to eliminate emotional reasoning.
After Each Market Resolves
- Record everything: Document the settlement date, market identifier, your forecast confidence, entry price observed, final outcome, and realised gain or loss.
- Score your calibration: Did your 70% confidence calls materialise approximately 70% of the time across your sample?
- Categorize by market type: Do your returns vary meaningfully across different domains such as geopolitical, digital assets, or athletic events?
- Review your losers honestly: Did the loss stem from flawed methodology or from sound reasoning that encountered 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 serves most practitioners well. Daily examination encourages excessive turnover; quarterly intervals allow drift and missed correction windows.
- What software should I use to track prediction market trades?
- PolyGram's integrated portfolio management system provides foundational functionality. For granular performance measurement, export your transaction log as CSV and process through spreadsheet applications or custom scripts.
- How many markets should I research before entering each week?
- Depth of analysis matters far more than breadth. Conducting rigorous due diligence on 3-5 opportunities typically outperforms superficial coverage of dozens of positions.