Most people who trade prediction markets never form their own view first. They see a market at 35 cents, decide it feels cheap or expensive, and click. That feeling approach is how you end up trading a narrative instead of expected value, so the whole process starts one step earlier than most people run it.
Form your own number before you look at the price
Start with a base rate. If the market is "Will Congress pass a crypto bill this session?", go look at how often Congress actually passes financial regulatory legislation in a given session. That base rate is your anchor. Then move off it based on the specifics. More co-sponsors than usual? Has it cleared committee? Is the administration behind it? Each piece of evidence nudges your estimate up or down.
Write the number down, and the reasoning behind it, before you check the market. This is the part people skip, and it matters because seeing the price first quietly rewrites your own estimate. If you land on 45% and the market is at 35%, you have a 10-cent gap worth digging into. If you land on 45% and the market is at 44%, there's no trade there and you should move on.
Not every edge is worth trading
An edge just means your number differs from the price in a way that creates positive expected value. But a 2-cent edge, say you're at 37% and the market's at 35%, barely survives fees and the cost of tying up capital. A 15-cent edge is more interesting, and it's also where you have to be honest with yourself: it might be a real mispricing, or it might mean the market knows something you don't.
So when your number is far from the price, the useful move is to ask why. What could other participants see that you can't? Is there a structural reason for the gap, like thin liquidity, regulatory limits on who can trade it, or recency bias from some similar event that just happened? Or does the market have polling, expertise, or information that makes its price better than your guess?
Sometimes the honest answer is that the market is right and you're wrong. That's a good outcome. It saved you from a bad trade. Other times you can name the specific reason the price is off, and that named reason is what gives you the confidence to size in.
Liquidity, exits, and resolution
A market can be mispriced and still not be tradeable. If you can't take a real position without moving the price, the opportunity is theoretical. Check order book depth before you commit. How much can you buy or sell before the price runs away from you? If your position eats all the liquidity within 5 cents of where it sits now, your real fill is nothing like the quote.
Exit liquidity is the half people forget. Getting in cheap is easy. But if your thesis changes, or you need the capital somewhere else, or fresh information moves the odds, can you get out without handing your whole edge back in slippage? Size to the liquidity you can actually move through, not to how strongly you feel.
Then there's resolution risk, which is the chance the market settles in a way you didn't expect even though you read the event correctly. Read the resolution criteria carefully and hunt for edge cases. A market called "Will Company X IPO in 2025?" could resolve on the pricing date, the first trading day, or the S-1 filing, and those can point at different outcomes for the same real-world event. On decentralized platforms, look at the oracle too: who proposes the resolution, what the dispute process is, how long it takes. If a contested resolution can lock your capital for weeks, that's a real cost and it belongs in your sizing.
Run it like a portfolio and keep the receipts
Treat your positions as a book, not a pile of one-off bets. Spread across event types, so politics, sports, crypto, economics, and across time horizons, so things resolving next week alongside things resolving next year. Load up on one event type and your results all move together, which kills most of the benefit of holding several positions.
Capital per position should track both edge size and how sure you are. A 15-cent edge you're confident in deserves more than a 5-cent edge you're shaky on. But no single position should be big enough that being wrong knocks you out of the game.
- Log every position: your probability at entry, the market price at entry, how it resolved, and the P&L.
- Over time that log tells you whether you're actually good at estimating or just think you are.
- If your estimates keep missing in the same direction, that's a systematic bias you can go fix.
Don't forget the clock on your money
Positions lock up capital until resolution, so convert your edge to an annualized return before you fall in love with it. A 5-cent edge that resolves in a week is a far better annualized return than a 15-cent edge that takes six months. Then compare that to what the capital earns elsewhere. If stablecoins pay you 5% and a market offers 10% annualized with real risk, the spread might not be worth it. At 50% annualized the math looks a lot friendlier.
All of this is slower than impulse betting, and that's the whole point. You're not trying to hold the most positions, you're trying to hold good ones. Ten to fifteen researched positions with a genuine edge will beat a hundred taken on vibes, and at Blockcircle the same discipline is what separates people who compound from people who churn. Keep the process boring and the results tend to take care of themselves.