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.

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.

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)

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 Management

Rule 1: Set Loss Limits

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:

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

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

Sentiment Indicators

Execution Tips

Timing Your Orders

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

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

Getting Better Fills

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:

| 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

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: 0.3% taker × 2 = 0.6%
Net: 1.4% gain (30% of gross eaten by fees)

Fix: Only trade when edge > fees

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