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Prediction markets, explained properly.
No hype, no promises. Just how these markets work, how they are priced, and what separates a considered position from a hunch.
- A deadline market loses a little every day nothing happens Contracts that ask whether something happens by a date are priced on the time left, not just the likelihood. Here is what that decay does to the price, the opening band and a drawdown that counts open profit.
- The cap sets the size. The drawdown sets how many. Classic position-sizing maths says how much to commit when you have an edge. Under a half-percent profit ceiling it almost never gets a say. The question that replaces it is how many full losses your drawdown can hold.
- A scheduled announcement does not walk the price. It jumps it. Markets tied to a release at a known minute behave differently from markets that drift toward an answer. The October rate decision is a live example of why size has to be set for the gap, not the mark.
- Start with how often it usually happens Before the story of a particular event, ask how often things like it turn out a given way. The base rate is where a forecast should begin, and choosing the reference class is most of the skill.
- Election night is not resolution day The US midterms are four weeks out and the chamber-control markets are among the busiest anywhere. The date on the market and the date it pays can be months apart, and the rules say exactly why.
- Why the outcomes add up to more than 100 In a multi-outcome event the YES prices rarely sum to exactly one dollar. The gap is a cost, the structure underneath links every outcome together, and both matter under a per-event cap.
- Crypto volatility and a drawdown that counts open profit On a perp desk, a pump that fully reverts is noise. Here it moves your floor for good. A worked example with eight Bitcoin positions that never closed and still breached.
- Prediction markets for crypto traders: what carries over If you trade perps or options, most of your instincts transfer. Leverage, liquidation and funding do not exist here — and three rules you have never had to think about do.
- Twenty events is not twenty risks The per-event cap forces you into breadth. Breadth assembled out of markets that all turn on the same fact is not breadth — it is one position wearing twenty tickets.
- The number on the tile is not a price you can trade The figure shown on a market is the midpoint of the book, and when the book is wide it is not even that. What you actually pay is set by the depth underneath it.
- A hit rate on its own tells you nothing Being right 60% of the time is excellent at one entry price and a slow loss at another. The threshold you have to beat is the price you paid, which is why a single accuracy figure is not a measure of skill.
- The question is not the contract. The criteria are. Every event contract carries a block of rules naming a source, a deadline and a set of edge cases. That text, not the headline, decides what your shares are worth.
- Every rule in one place Your dashboard shows five of the rules you are being measured against. There are seven, and the two it leaves out are the ones that decide the outcome.
- Max Profit Per Event, explained One rule decides who finishes an evaluation and who does not. It caps each event at half a percent of account size, and it aggregates across every market inside that event.
- The fee curve nobody publishes The commission is one percent everywhere. Measured against the profit a capped event can actually produce, trading at 80 cents costs sixteen times more than trading at 20.
- What "To win" actually means The number your ticket shows is gross settlement, not gain. On a 59-cent contract it reads 2.4 times larger than what you would actually make.
- What a prediction market actually is Event contracts settle at 100 or 0. That single fact explains the pricing, the strategy, and most of the mistakes newcomers make.
- How event contract venues differ Same broad idea, materially different structures. What separates the two largest event contract venues, and why it changes how you trade each.
- What a proprietary trading firm is, and what it is not The model is old and unglamorous: a firm allocates capital to traders it has screened. Here is how the modern retail version works and what to check before paying anyone.