In this guide
What separates traders who generate steady returns from those treading water—or worse, losing capital—rarely hinges on forecasting skill alone. The real separator is disciplined methodology and systematic execution. This guide outlines the core routines that institutional and serious independent traders follow daily.
Before Entering Any Position
- Define your edge clearly: What insight or information advantage justifies this trade? Commit your reasoning to a single sentence before committing capital.
- Evaluate the spread: Does the gap between bid and ask prices consume so much of your expected profit that the trade becomes unviable?
- Verify liquidity conditions: Will you be able to unwind this position at a reasonable price if circumstances force an exit? Study the depth of available orders.
- Form your view in isolation: Develop your own probability estimate without consulting market quotes first, to guard against anchoring to prevailing prices.
- Size positions with discipline: Apply the half-Kelly criterion. Never risk more than 5% of total capital on any single trade, regardless of confidence level.
During Position Management
- React to material developments: When significant events materialise (speeches, economic data, announcements), reassess your probability and determine whether to increase exposure, maintain holdings, or close out.
- Avoid constant monitoring: Minute-to-minute price swings represent noise rather than signal. For markets with extended timeframes, a daily check-in suffices.
- Establish exit rules in advance: Decide your loss threshold before you enter. This pre-commitment prevents emotion-driven mistakes when positions move against you.
After Each Market Resolves
- Document all trades meticulously: Capture timestamp, market identifier, your stated probability, entry price, final outcome, and realised gain or loss.
- Measure forecast accuracy: Did your 70% predictions actually resolve correctly roughly 70% of the time? This calibration check is essential.
- Segment performance by domain: Do you consistently profit in certain categories (geopolitical, technology, sports) whilst struggling in others?
- Dissect unsuccessful trades fairly: Distinguish between flawed reasoning and sound analysis that simply lost to 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?
- Weekly assessment represents the sweet spot for most participants. Daily scrutiny encourages excessive trading; monthly intervals allow drift and missed correction windows.
- What software should I use to track prediction market trades?
- PolyGram's native portfolio management tools offer a solid foundation. For deeper statistical analysis, export your trade log as CSV and process the data through Excel, Google Sheets, or a Python script.
- How many markets should I research before entering each week?
- Depth of research matters far more than breadth. Thorough examination of 3-5 carefully selected opportunities typically yields better results than superficial scanning across 20 candidates.