In this guide
What separates traders who generate steady returns from those who struggle to break even typically hinges on disciplined methodology rather than raw forecasting ability alone. This guide outlines the core habits that institutional and independent professionals follow during every trading session.
Before Entering Any Position
- Articulate your edge: What insight gives you an advantage that the broader market hasn't yet priced in? Commit this to a single sentence before you commit capital.
- Check the spread: Does the gap between buy and sell prices allow your edge to overcome trading friction?
- Assess liquidity: Will you be able to unwind this position at a fair price if circumstances change? Examine the depth of available orders.
- Set your probability independently: Develop your own forecast in isolation, away from displayed market odds, to prevent cognitive anchoring.
- Calculate position size: Apply the half-Kelly criterion. Never risk more than 5% of your total capital on any single trade, regardless of confidence level.
During Position Management
- Update on new information: As material events unfold (speeches, announcements, published figures), revise your estimate and determine whether to expand, maintain, or close your stake.
- Don't check obsessively: Minute-to-minute swings represent random variation rather than signal. Monitor your holdings once per day for markets with longer time horizons.
- Pre-define your exit criteria: Establish in advance the price level at which you will cut losses if your thesis proves incorrect, removing emotion from the decision.
After Each Market Resolves
- Record everything: Timestamp, market identifier, your forecast, entry price, final outcome, and realised gain or loss
- Score your calibration: Did events you assessed as 70% probable actually occur 70% of the time across your history?
- Categorize by market type: Do your returns differ across political, technology, or sports markets?
- Review your losers honestly: Did a flawed approach lead to the loss, or did sound reasoning simply encounter unfavourable variance?
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 turnover, whilst waiting a full month risks missing signals for tactical adjustments.
- What software should I use to track prediction market trades?
- PolyGram's native portfolio tracking system provides a solid foundation. For deeper statistical analysis, export your trade log as CSV 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 work on 3-5 carefully selected markets typically yields better results than superficial review of a larger universe.