Position Sizing on Prediction Markets

Polymarket is not a casino. But without a position sizing framework, you'll lose like you're at one.

The core problem with flat betting

Most traders on Polymarket use flat sizing. This is suboptimal for two reasons: it undersizes high-conviction trades and oversizes marginal ones.

Kelly Criterion adapted for prediction markets

The Kelly Criterion gives you an optimal bet size based on your edge and odds. For a binary market at price p where you believe the true probability is q:

Kelly fraction = (q - p) / (1 - p)

Practical rules

1. Never size any single position above 5% of bankroll
2. Never hold correlated positions exceeding 20% combined
3. Track your actual edge vs. expected edge over time