In this guide
What separates traders who generate steady returns from those treading water or falling behind typically hinges on methodology and discipline rather than forecasting ability alone. This guide outlines the core procedures that seasoned professionals implement during every trading session.
Before Entering Any Position
- Articulate your edge: What information or insight gives you an advantage that other participants lack? Commit this reasoning to a single sentence prior to executing any trade.
- Check the spread: Does the gap between bid and ask prices remain tight enough that your analytical advantage outweighs the cost of transacting?
- Assess liquidity: Will you be able to unwind this position at a profit when circumstances demand it? Examine the depth of available orders.
- Set your probability independently: Develop your own estimate without consulting market quotations first, thereby protecting yourself from anchoring bias.
- 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: When significant events unfold (speeches, economic data, announcements), revise your probability assessment and determine whether to increase, maintain, or close your stake.
- Don't check obsessively: Intraday price movements represent statistical noise. For markets with longer timeframes, review daily rather than multiple times per hour.
- Pre-define your exit criteria: At what price level will you cut losses if your thesis proves incorrect? Establish this threshold ahead of time to sidestep emotion-driven choices.
After Each Market Resolves
- Record everything: Capture the date, market identifier, your confidence level, entry price, final outcome, and realised gain or loss
- Score your calibration: Did predictions you marked as 70% confident actually resolve correctly roughly 70% of the time?
- Categorize by market type: Do your results show stronger performance in outcome markets tied to political events versus those in cryptocurrency or athletics?
- Review your losers honestly: Did this loss stem from flawed methodology, or was it simply an unlucky outcome despite sound reasoning?
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 traders. Reviewing daily tends to trigger excessive trading; reviewing only monthly allows problems to compound before correction.
- What software should I use to track prediction market trades?
- PolyGram's integrated portfolio tracking system provides a solid foundation. For more sophisticated analysis, export your trade records as CSV and process them using 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 examination of 20 different opportunities.