Not trading advice. Not financial advice. This is a mathematical exercise.
No representation is made that any account will or is likely to achieve profits.
Trading prediction markets involves risk of loss.
Algorithm Reference Card
KALSHI EUCLIDEAN
7-Step Discretionary Algorithm
Prediction Market Trading Framework · Mathematical Edge Over Intuition
┃ Key Metrics
Round Trip Cost
Spread + Fee ≈ 4¢
Required Edge
> 4¢ to break even
Skip-to-Trade Ratio
~5:1 (80% filtered)
Half-Kelly Ruin Prob.
< 1%
Edge Per Trade
Small but positive
Edge Compounds
Over volume
┃ Order Book Geometry
Bid Ask Mid / Limit Entry
┃ The 7 Steps
1
Step One
CONTRACT SCREENING
24hr volume > $500
Spread ≤ 5¢
Expiry: 3–90 days
Price: 25–75¢
Result: ~15–20 candidates
2
Step Two
FAIR VALUE ESTIMATION
Research event causal factors
Historical data on similar events
Assign probability + confidence (High / Med / Low)
Skip if Low confidence
3
Step Three
EDGE CALCULATION
EV = (Estimate − Price) − RoundTripCost
Only trade if EV > 0
Expected skip rate: 4 out of 5
Edge magnitude determines position size
4
Step Four
POSITION SIZING (Half-Kelly)
Kelly % = Edge / Odds Received
Position = ½ Kelly × Capital
Low confidence → Quarter-Kelly
NEVER size by feel
5
Step Five
ORDER PLACEMENT
LIMIT ORDER at mid-price ONLY
Never market order
Timeout: 15 min (high vol) / 30 min (med vol)
Cancel if unfilled, re-screen
6
Step Six
EXIT PROTOCOL (3 conditions)
●Profit Target: exit at estimated fair value
●Stop Loss: exit at ½ expected gain adverse move
●Time Stop: exit after 72 hours regardless
Whichever hits first
7
Step Seven
JOURNAL & REVIEW
Record every trade (entry, estimate, confidence, size, exit, P&L)
Weekly calibration review
Adjust estimation process based on actual vs predicted frequencies
Compounding skill is the only permanent edge
Geometric Principle
"You do not need to know what will happen. You need to know what things are worth,
and what things are worth is visible in the order book to anyone who knows how to read it."