Why position sizing matters
The single fastest way to blow up a prediction market account is to over-bet a real edge. Even with a positive expected-value trade, sizing too large means a normal losing streak can wipe you out before the edge plays through.
Risk management in prediction markets
Caps total exposure on any single contract; diversifies across uncorrelated markets; treats every position as a fraction of bankroll, not a fixed dollar amount.
Avoiding overexposure
This calculator hard-caps suggested positions at 25% of bankroll, even if a model says full Kelly would be larger. Most disciplined traders use a quarter- or half-Kelly fraction.
How experienced traders manage risk
They keep position-level losses small enough that a string of bad luck doesn't end the game. They size based on edge, not conviction. They re-baseline after big wins so they don't compound past their risk capacity.
Questions
Frequently asked questions
What is the Kelly criterion?+
A formula for sizing bets to maximise long-run growth given an edge. Full Kelly is aggressive; most traders use a fractional version.
Is the Kelly fraction the right size to bet?+
No — it's a ceiling. Real-world sizing should be smaller to account for estimation error in your probability.
How much should I risk on one contract?+
Most disciplined traders keep any single position to a few percent of bankroll, regardless of how attractive the trade looks.