Trading Guide: The Importance of Basic Math in Trading Prediction Markets | Value Network

Trading Guide: The Importance of Basic Math in Trading Prediction Markets


Trading in prediction markets isn’t only about the markets. Trading is about making money. Mathematics has a huge role to play, and it governs the markets.

Making money on the prediction market is about carefully analyzing statistics and ultimately about basic math.

Traders also need math to be on their side. And since the rules of trading prediction markets are already set, traders just need to make the calculations. Unlike forex or stock trading, the risk/reward ratio is non-negotiable in prediction markets. The only thing left to improve or control in a sense is the win rate.

We have a digital option with an 80% payout; if a trader wants to break even, he has to win 5 trades for every 4 losses. In other words, a trader needs to win more often than he loses just to break even. To make any money with an 80% payout, the trader needs to be correct at least 60% of the time. It’s tough for traders to be able to correctly analyze the market and predict its direction. They also need to pick the option type that will best suit their trading style and market conditions.

The market will either be trending, in a range, or a mixture of the two. Traders need to pick their time to strike and trade with a clear idea of what they are looking for. Keep in mind that emotions and mathematics mix just as well as oil and water. Traders need mathematics on their side.

Improving the chances of every single trade being a winner is what actually puts basic math on the trader’s side.

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