Trading Guide#

Master the art of prediction market trading. This guide covers strategies, risk management, and practical tips for consistent success on Seesaw.

Understanding the Game#

Core Strategies#

1. Momentum Trading#

Trade in the direction of recent price movement.

When to use:

Strong directional move in progress
High volume confirming trend
No major resistance/support nearby

Risks:

Trend exhaustion
Mean reversion
Whipsaws

2. Mean Reversion#

Bet on prices returning to average.

code

Setup:
├── Price extended from moving average
├── RSI showing overbought/oversold
└── Volume declining

Trade:
└── Fade the move (trade opposite direction)

When to use:

Price at statistical extremes
No fundamental catalyst for move
Range-bound market conditions

3. News/Event Trading#

Trade around scheduled events.

Event Type	Typical Impact	Strategy
FOMC	High volatility	Buy straddle equivalent
CPI Release	Directional	Trade expected direction
Earnings	Asset-specific	Position before release

Caution: Events can move prices beyond expectations. Size conservatively.

4. Technical Breakouts#

Trade when price breaks key levels.

Position Sizing#

Never risk more than you can afford to lose.

Kelly Criterion (Simplified)#

code

Optimal Size = (Edge / Odds) × Bankroll

Where:
├── Edge = Your win probability - Market implied probability
├── Odds = Potential profit / Potential loss
└── Bankroll = Total trading capital

Practical Example#

Market: YES @ 0.50 (50% implied)

Your estimate: 60% chance of UP

Edge: 60% - 50% = 10%

Odds: 1:1 (win 0.50, lose 0.50)

Kelly = 0.10 / 1 = 10% of bankroll

With $1,000 bankroll:

└── Max position: $100

Conservative Sizing#

Most traders use half-Kelly or less:

Risk Tolerance	Kelly Fraction	$1K Bankroll
Aggressive	Full Kelly	$100
Moderate	Half Kelly	$50
Conservative	Quarter Kelly	$25

Risk Management#

Rule 1: Set Loss Limits#

code

Daily loss limit: 5% of bankroll
├── $1,000 bankroll → $50 max daily loss
├── Hit limit → Stop trading for the day
└── Review what went wrong

Rule 2: No Revenge Trading#

Rule 3: Diversify Across Markets#

Don't put all your capital in one market:

Allocation	Description
Single market	Max 25% of bankroll
Correlated markets	Max 40% combined
Cash reserve	Min 30% available

Rule 4: Know Your Exit#

Before entering, know:

Target price for profit
Stop price for loss
Time-based exit (market close)

Reading the Market#

Order Book Analysis#

code

Strong Bid Support:
├── Large bids stacked below market
├── Thin asks above market
└── Suggests bullish sentiment

Strong Ask Resistance:
├── Large asks stacked above market
├── Thin bids below market
└── Suggests bearish sentiment

Volume Analysis#

Pattern	Meaning
High volume + price up	Strong bullish
High volume + price down	Strong bearish
Low volume + price up	Weak rally
Low volume + price down	Weak selloff

Sentiment Indicators#

Execution Tips#

Timing Your Orders#

code

Market Opens:
├── Wide spreads
├── Low liquidity
└── Wait for book to develop

Mid-Market:
├── Tighter spreads
├── Best liquidity
└── Optimal execution window

Near Close:
├── Spreads widen
├── Urgency trades
└── Higher slippage

Avoiding Slippage#

Use limit orders - Never pay more than intended
Check depth - Ensure liquidity for your size
Split large orders - Better average price
Avoid close timing - Spreads widen near expiry

Getting Better Fills#

code

Instead of: Market buy 100 YES

Try:
├── Limit buy 50 @ best ask
├── Wait for fill
├── Limit buy 50 @ best ask
└── Better average price

Keeping Records#

Track every trade:

markdown

| Date | Market    | Side | Entry | Exit | Size | P&L | Notes           |
| ---- | --------- | ---- | ----- | ---- | ---- | --- | --------------- |
| 1/15 | SOL 14:00 | YES  | 0.55  | 1.00 | 100  | +45 | Momentum play   |
| 1/15 | BTC 14:15 | NO   | 0.40  | 0.00 | 50   | -20 | Reversal failed |

Metrics to Track#

Metric	Formula	Target
Win Rate	Wins / Total Trades	> 50%
Avg Win	Σ Profits / Wins	Higher than Avg Loss
Avg Loss	Σ Losses / Losses	Lower than Avg Win
Profit Factor	Gross Profit / Gross Loss	> 1.5
Sharpe Ratio	(Return - Risk Free) / Std Dev	> 1.0

Common Mistakes#

1. Overtrading#

Problem: Trading every market

Result: Fees eat profits, poor decisions

Fix: Only trade with clear edge

2. Oversizing#

Problem: Betting too much on single trade

Result: Ruin after string of losses

Fix: Kelly criterion, position limits

3. Ignoring Fees#

Trade: Buy YES @ 0.50, Sell @ 0.51

Gross: 2% gain

Fees: 2.0% taker × 2 = 4.0%

Net: -2.0% loss (fees exceed gross profit)

Fix: Only trade when edge > fees (2.0% per taker trade)

4. Chasing Losses#

Day 1: -$100

Day 2: Double size to recover → -$150

Day 3: Double again → -$250

Fix: Accept losses, stick to plan

Advanced Topics#

Market Making - Providing liquidity for profit
Automation - Algorithmic trading basics
Arbitrage - Exploiting price inefficiencies

Trading Guide#

Master the art of prediction market trading. This guide covers strategies, risk management, and practical tips for consistent success on Seesaw.

Understanding the Game#

Core Strategies#

1. Momentum Trading#

Trade in the direction of recent price movement.

When to use:

Strong directional move in progress
High volume confirming trend
No major resistance/support nearby

Risks:

Trend exhaustion
Mean reversion
Whipsaws

2. Mean Reversion#

Bet on prices returning to average.

code

Setup:
├── Price extended from moving average
├── RSI showing overbought/oversold
└── Volume declining

Trade:
└── Fade the move (trade opposite direction)

When to use:

Price at statistical extremes
No fundamental catalyst for move
Range-bound market conditions

3. News/Event Trading#

Trade around scheduled events.

Event Type	Typical Impact	Strategy
FOMC	High volatility	Buy straddle equivalent
CPI Release	Directional	Trade expected direction
Earnings	Asset-specific	Position before release

Caution: Events can move prices beyond expectations. Size conservatively.

4. Technical Breakouts#

Trade when price breaks key levels.

Position Sizing#

Never risk more than you can afford to lose.

Kelly Criterion (Simplified)#

code

Optimal Size = (Edge / Odds) × Bankroll

Where:
├── Edge = Your win probability - Market implied probability
├── Odds = Potential profit / Potential loss
└── Bankroll = Total trading capital

Practical Example#

Market: YES @ 0.50 (50% implied)

Your estimate: 60% chance of UP

Edge: 60% - 50% = 10%

Odds: 1:1 (win 0.50, lose 0.50)

Kelly = 0.10 / 1 = 10% of bankroll

With $1,000 bankroll:

└── Max position: $100

Conservative Sizing#

Most traders use half-Kelly or less:

Risk Tolerance	Kelly Fraction	$1K Bankroll
Aggressive	Full Kelly	$100
Moderate	Half Kelly	$50
Conservative	Quarter Kelly	$25

Risk Management#

Rule 1: Set Loss Limits#

code

Daily loss limit: 5% of bankroll
├── $1,000 bankroll → $50 max daily loss
├── Hit limit → Stop trading for the day
└── Review what went wrong

Rule 2: No Revenge Trading#

Rule 3: Diversify Across Markets#

Don't put all your capital in one market:

Allocation	Description
Single market	Max 25% of bankroll
Correlated markets	Max 40% combined
Cash reserve	Min 30% available

Rule 4: Know Your Exit#

Before entering, know:

Target price for profit
Stop price for loss
Time-based exit (market close)

Reading the Market#

Order Book Analysis#

code

Strong Bid Support:
├── Large bids stacked below market
├── Thin asks above market
└── Suggests bullish sentiment

Strong Ask Resistance:
├── Large asks stacked above market
├── Thin bids below market
└── Suggests bearish sentiment

Volume Analysis#

Pattern	Meaning
High volume + price up	Strong bullish
High volume + price down	Strong bearish
Low volume + price up	Weak rally
Low volume + price down	Weak selloff

Sentiment Indicators#

Execution Tips#

Timing Your Orders#

code

Market Opens:
├── Wide spreads
├── Low liquidity
└── Wait for book to develop

Mid-Market:
├── Tighter spreads
├── Best liquidity
└── Optimal execution window

Near Close:
├── Spreads widen
├── Urgency trades
└── Higher slippage

Avoiding Slippage#

Use limit orders - Never pay more than intended
Check depth - Ensure liquidity for your size
Split large orders - Better average price
Avoid close timing - Spreads widen near expiry

Getting Better Fills#

code

Instead of: Market buy 100 YES

Try:
├── Limit buy 50 @ best ask
├── Wait for fill
├── Limit buy 50 @ best ask
└── Better average price

Keeping Records#

Track every trade:

markdown

| Date | Market    | Side | Entry | Exit | Size | P&L | Notes           |
| ---- | --------- | ---- | ----- | ---- | ---- | --- | --------------- |
| 1/15 | SOL 14:00 | YES  | 0.55  | 1.00 | 100  | +45 | Momentum play   |
| 1/15 | BTC 14:15 | NO   | 0.40  | 0.00 | 50   | -20 | Reversal failed |

Metrics to Track#

Metric	Formula	Target
Win Rate	Wins / Total Trades	> 50%
Avg Win	Σ Profits / Wins	Higher than Avg Loss
Avg Loss	Σ Losses / Losses	Lower than Avg Win
Profit Factor	Gross Profit / Gross Loss	> 1.5
Sharpe Ratio	(Return - Risk Free) / Std Dev	> 1.0

Common Mistakes#

1. Overtrading#

Problem: Trading every market

Result: Fees eat profits, poor decisions

Fix: Only trade with clear edge

2. Oversizing#

Problem: Betting too much on single trade

Result: Ruin after string of losses

Fix: Kelly criterion, position limits

3. Ignoring Fees#

Trade: Buy YES @ 0.50, Sell @ 0.51

Gross: 2% gain

Fees: 2.0% taker × 2 = 4.0%

Net: -2.0% loss (fees exceed gross profit)

Fix: Only trade when edge > fees (2.0% per taker trade)

4. Chasing Losses#

Day 1: -$100

Day 2: Double size to recover → -$150

Day 3: Double again → -$250

Fix: Accept losses, stick to plan

Advanced Topics#

Market Making - Providing liquidity for profit
Automation - Algorithmic trading basics
Arbitrage - Exploiting price inefficiencies