01.Read the criteria, not the title
The market title is a summary. The resolution criteria are the actual contract, and they decide who gets paid. Before committing, be able to state the specific, reportable fact that settles the market and which source reports it. If you cannot, you do not yet know what you are trading — and that is not a beginner problem, it is where experienced traders lose money too.
- Identify the exact fact that settles it and the source that reports that fact.
- Check deadlines and timezones explicitly; they cause more disputes than anything else.
- Ask how a partial or technically-satisfied outcome would resolve.
02.Check depth before you decide size
The displayed price applies only to the volume resting at the top of the book. If your order is larger than that, you fill through worse levels and pay more than you expected — and you will face the same problem in reverse when you exit. On a quiet market this can cost more than the position was ever going to make.
- Look at the depth beneath the price, not just the price.
- Check what selling would cost too, not only buying.
- If your order is a large share of visible depth, reduce the size.
03.Size it as though you cannot exit
A losing contract settles at zero, and liquidity thins out exactly when the news that ruins your position lands. Decide your position size as a small fixed fraction of what you are willing to trade with overall, set before you look at the market rather than after you have talked yourself into it.
- Pick the fraction in advance, as a rule, not per trade.
- Assume you cannot sell out; treat an available exit as a bonus.
- Your first position should be small enough that being wrong is uninteresting.
04.Placing it
A limit order at your price is usually the better first order: you avoid crossing the spread, and there is nothing urgent about a first trade. A market order fills immediately at whatever the book offers, which matters when news is moving and costs you when it is not.
- Limit order when nothing is urgent, which is most of the time.
- Market order when getting filled matters more than the price.
- You can sell before resolution — you are not locked in until settlement.
05.Afterwards
Write down why you took the position while the reasoning is fresh. Reviewing those notes after resolution is the only reliable way to tell a good decision from a lucky one, and telling them apart is most of what improvement consists of.
- Record your reasoning and your probability estimate at entry.
- Review after resolution: was the process sound, regardless of outcome?
- A winning trade from bad reasoning is a problem, not a success.