In this guide
What separates traders who generate steady returns from those who merely break even—or worse, suffer losses—typically hinges on disciplined methodology rather than forecasting ability alone. This guide outlines the core routines that seasoned market participants follow during their trading day.
Before Entering Any Position
- Articulate your edge: What information or insight do you possess that the broader market has overlooked? Commit this to a single sentence before committing capital.
- Check the spread: Does the distance between bid and ask prices allow your advantage to overcome trading friction?
- Assess liquidity: Would you be able to unwind this holding at a favourable price if circumstances demanded it? Review the order book carefully.
- Set your probability independently: Develop your own forecast in isolation before examining what the market is pricing to sidestep anchoring bias.
- Calculate position size: Apply the half-Kelly criterion. Never risk more than 5% of total capital on any single trade, regardless of confidence level.
During Position Management
- Update on new information: When significant events materialise (speeches, economic figures, announcements), reassess your forecast and determine whether to increase exposure, maintain, or close out.
- Don't check obsessively: Intraday volatility represents signal noise rather than meaningful shifts. For markets with longer timeframes, a daily review suffices rather than continuous monitoring.
- Pre-define your exit criteria: Establish the price level at which you would exit a losing position before you establish the trade itself, removing emotion from the decision.
After Each Market Resolves
- Record everything: Capture the settlement date, market identifier, your forecast, entry price, final outcome, and realised gain or loss
- Score your calibration: Did your predictions assigned 70% likelihood actually occur roughly 70% of the time?
- Categorize by market type: Do your returns vary meaningfully across different domains—elections, digital assets, sporting events?
- Review your losers honestly: Did the loss stem from flawed reasoning or simply from sound analysis 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 works best for the majority of participants. Reviewing daily tends to encourage 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 granular performance analysis, export your trade data 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 due diligence on 3-5 opportunities typically yields superior results compared to superficial examination of 20 different markets.