What you're buying
In real money prediction markets, you buy and sell shares in a particular outcome. For a standard binary contract with a $1 payout, a winning share pays $1 and a losing share pays $0; check the contract’s own settlement rules. A reason to buy is that your research puts the event's probability above the probability implied by the price.
1. Choose a platform
Your location and the events you want to trade will narrow your choices. Options include regulated exchanges such as Kalshi and decentralized platforms such as Polymarket. Compare the platforms before choosing.
2. Fund your account
Available payment methods vary by platform and country. Check supported bank transfers, cards, or crypto deposits, along with fees and withdrawal rules, before sending money. Start with a small amount and research the markets you want to trade.
3. Research the event
Check your instincts against evidence. Historical data and expert analysis can help you spot trends that other traders may have missed.
Reading prices as probabilities
If a contract for "Rain tomorrow in NYC" trades at 30 cents and pays $1 if it rains, the price implies a 30% chance. If your research puts the chance at 50%, the contract looks underpriced according to your estimate. This is what traders mean by a "value trade."
The Kelly criterion is a method traders use to work out how much of their bankroll to put on an outcome. Position size matters even when you feel certain: a rare, unexpected event, sometimes called a "black swan," can have a large effect.
Finding information the market has missed
An information advantage can come from data or analysis that other traders have not yet priced in. Someone who knows maritime law might notice a detail others overlook. The same can happen with close study of local polling or live weather data. Traders often specialize in a subject so they can judge that information well.
Trading terms
- The order book lists the market's current buy and sell orders.
- The spread is the gap between the highest buy price and the lowest sell price.
- Slippage is the difference between the price you expect and the price you actually trade at.
- Resolution is the settlement of a market using a specified source, sometimes called an oracle.
Managing risk when prices move
Breaking news can move prediction market prices sharply. Decide in advance when you would sell. If new information weakens your prediction, taking a small loss may make more sense than holding on for an outcome that now looks less likely.
Other traders have money at stake too. A correct prediction only produces a net profit when the payout exceeds your purchase cost and all fees. You can lose the full amount committed to a trade.