Two traders make the same correct prediction. One makes 5% on their bankroll. The other makes 18%. The difference is almost never the quality of the prediction — it is position sizing. Knowing how much to bet on what you know is a distinct skill from knowing what will happen.
The Sizing Ladder
A practical sizing ladder for prediction market positions: 1-2% of bankroll for speculative positions where the edge is possible but uncertain. 3-5% for solid positions with clear edge and well-understood resolution criteria. 7-10% for your highest-conviction plays with verified domain expertise and tight resolution criteria.
The maximum position size rule: if you would be genuinely stressed watching this position move against you, it is too large. Size for emotional sustainability, not just mathematical optimality.
Scaling In and Out
Do not always enter a position at full size. On markets with uncertain resolution timing, starting at 50% of target size and adding as the thesis confirms gives you better average entry prices and lower variance on uncertain entry points.
Scaling out — selling portions of winning positions as they appreciate — is how you capture edge at multiple price levels rather than trying to time the exact top.
- →Enter at 50% size when thesis is strong but timing is uncertain
- →Add the remaining 50% when a confirming event or data point arrives
- →Take partial profit at 70% of your target price — this returns capital without fully closing the position
- →Close the remainder at 85-90% or 72 hours before resolution, whichever comes first
Bankroll Management Rules
Never have more than 40% of your bankroll in open positions simultaneously. This rule feels conservative until you have a bad run across correlated markets and you are grateful for the dry powder. Liquidity in prediction markets is your optionality — protect it.