Most traders lose money not because their read was wrong, but because they played the wrong market entirely. Bad resolution criteria, thin liquidity, and herd-priced certainty can turn a correct call into a losing position. Before you stake anything, run the question through these five checks.
1. Who Resolves This, and How?
Resolution criteria is where money disappears quietly. If the resolution source is vague — "credible media reports" or "at the discretion of the admin" — you're not trading probability, you're trading interpretation risk. Read the fine print. If it's ambiguous, that ambiguity is priced in somewhere, and probably not in your favor.
2. Is the Liquidity Real?
A market sitting at 94% with $4,000 in volume isn't a consensus — it's three people agreeing. Thin markets move violently on small orders, which means the price reflects whoever traded last, not the actual crowd. Look for depth, not just the headline probability.
3. What's the Time Decay Doing?
A market that resolves in two weeks at 80% is very different from one resolving in eight months at 80%. Capital locked in a slow-moving, high-probability market has an opportunity cost. Ask: what else could this money be doing?
4. Is the Price Telling You Anything New?
If a market is at 97% and every news outlet is saying the same thing, you're not getting an edge — you're paying for the obvious. The crowd has already priced the headlines. The only interesting bet is where the market diverges from the news cycle, not where it echoes it.
5. What's the Realistic Path to the Other Side?
Before buying Yes, map the No scenario concretely. Not "something could go wrong" — what specifically? If you can't articulate a credible path to resolution flipping, you don't understand the market well enough to trade it.
A market that survives all five questions is rare. That's the point.