Part One: The Basics
Guide by jipkin, updated June 2018
(To skip straight to Part Two: https://predictingpolitics.com/guides/how-to-play-the-polling-markets-on-predictit-part-two/)
Ah, the PredictIt polling markets. The perfect marriage of simple data analysis, research ability, comment-section pumping, and glorious, glorious swings. You’ve seen them pop up in the “trending” and “biggest movers” pages every day. But how on Earth are they actually played? Is it pure gambling? Just throw a dart and pick a contract and hope for the best?
Well no, there’s a little bit more to it than that. Polling markets, once you’ve learned the basics and spent a little time learning their ebbs and flows, are really not as obtuse or difficult as they seem. The people that seem to win in them over and over aren’t that much smarter than you – they’re just a little bit more informed. And staying informed? Not nearly as difficult as you think. This is part one of a two-part series in learning the basics of how to play the polling markets.
The goal here, shamelessly, is to encourage you to venture some of your money (maybe just a little bit at first!) into these markets. No, really! The water is fine…
What You’re Betting On
There are two basic polling markets: ones that resolve on aggregates maintained by realclearpolitics (RCP) and ones that resolve on 538’s.
Open this URL in a separate tab: http://www.realclearpolitics.com/epolls/other/president_trump_job_approval-6179.html
See the number written under “Approve”? You’re betting on what that number will be at 11:59 p.m. on Friday night. (All times in this primer are Eastern, as this is the timezone PI operates in.)
Where does this number come from? Well, as you can see it’s merely a simple average of all the numbers in the column below it, rounded to the first decimal.
Each approval number comes from a separate poll, identified by name and with a link in the left-most column.
Reframed then, the game here is straightforward: What polls will be in the average on Friday at 11:59 p.m., and what will each of their approval numbers be?
538’s approval and generic ballot averages are maintained here:
How do they get from the list of polls to the numbers on the trendline? Well that’s a bit of secret sauce that I don’t think any trader fully understands (or has reverse-engineered – maybe you can be the first!). You can read about 538’s methodology here, but I recommend the following simple heuristic:
If the poll’s value, once adjusted, is above the average, it will shift the average up. If below (again after adjustment) it will shift the average down. Polls with more respondents have bigger impacts.
The Rasmussen Market
Ras is a classic market (taking the baton from Gallup, which used to have a daily poll that’s since been discontinued). Every day, the fine folks at Rasmussen robo-poll 500 people. They massage the numbers a bit, then average those 500 people’s responses with those of the 500 from the day before and with those of the 500 from the day before that. (This “average” is weighted unpredictably, so that one day’s responses might contribute more than the others). Rasmussen then reports the ensuing 3-day average of 1500 people’s responses.
The way this works, Ras on Thursday will report results from data collected Monday, Tuesday, and Wednesday. On Friday, they will each report results from Tuesday, Wednesday, and Thursday.
Of course, Rasmussen doesn’t tell you what the daily averages are – unless you pay. For $150 a month, you can get the daily numbers, along with the rolling 3-day, at around 8:30AM. This is one hour before the 3-day number is published publicly. This is important to know because this is why the market moves at 8:30 AM every day (and why you should be cautious about leaving offers out at that time). It’s also why the market closes at 8AM Wednesday – so that no one can trade the final number before anyone else.
What to do if you don’t want to fork over $150? Well the good news is that enough people have access to the $150 data that there’s a bunch of competition for those shares anyway. The rest of the trading (and money) is made by people making simple predictions based on whether they think the number is going to go up or down.
I will say this: knowing the dailies (even if you can’t react quickly to them) is invaluable for determining accurate pricing. If a high or low daily is falling off the 3-day average, that will give you insight into how the average, and the market price, might move.
538 vs RCP: The Polls
538 loves polls. The more the merrier. RCP is a picky eater – only some polls allowed!
The differences between which poll each uses can be a bit maddening to learn. Here’s a quick primer to the differences.
(1) 538 will use almost every poll, so long as it isn’t fake. RCP only uses polls it’s used in the past (scroll through the polling data at the bottom of the page to get a handle on it) except when they decide not to (like with AP-NORC) or when they decide to add a new poll they’ve never used before (like Harvard-Harris).
(2) 538 updates Ras such that there are no overlapping 3-day periods in the average at any one time (meaning that as a new Ras is added, the older Ras’s in the average are also shifted up a day). RCP only allows one version of a poll in its average at any time, meaning that only the most current Ras number will ever contribute to the average.
(3) 538 uses every YG it can get its hands on. This includes all the daily numbers. RCP only uses the weekly YG done in partnership with The Economist.
(4) 538 uses Reuters directly from the Reuters polling explorer on both Tuesday and Friday. RCP only uses the Wednesday report put out by Ipsos. 538 does not use this Wednesday report.
(5) 538 ages out the influence of older polls gradually according to the start date of the polling period for that poll. RCP will randomly and capriciously “drop” older polls from the average. RCP drops are notoriously difficult to predict and can swing the market bigly!
(6) For Presidential Approval, 538 uses the “All respondents” number before it uses the “Registered Voters” number before it uses the “Likely Voters” number (if a poll reports multiple such numbers). This is reversed for RCP, which prefers LV > RV > A.
The basic challenge in a polling market is to answer the following questions:
(1) What polls are going to be released in time to impact the market?
(2) How can I get those numbers as soon as possible?
How did you know that poll was coming out???
One of the most common frustrations new players face (I was there once, for sure) is the feeling that they’re hopelessly behind the curve when it comes to knowing what polls are coming when. So how do we do it?
First, study the historical trends for poll frequency. Network polls (ABC, NBC, CBS) tend to be monthly (except when they’re not). Some polls are quarterly. Some polls come every two weeks. Some polls are random. Sometimes the patterns change.
Seriously, if we knew about something coming it was most likely because of twitter. Find the pollsters, or the people behind the polls, and follow them on twitter. Some pollsters announce that they’re going to be doing polls, or that they will be releasing one soon. Some are friendly enough that if you simply ask them when a poll is coming, they will tell you (yes, this works).
Typically, the “pro” players go into each week with a general idea of what polls they think might come. Often, they are surprised when one comes earlier or later than expected. But they always get the news in time to react appropriately.
How did you get the poll so fast???
Beyond knowing what’s coming, it’s also quite beneficial to be able to get the Trump Approval number from that poll as soon as it comes out. After all, polls come out elsewhere before they show up on RCP (indeed, the “will-it-post” game is a popular one to play in the comment sections in the time between the poll coming out and being added to the average).
Figuring out how to get a new poll result as fast as possible is part of the fun of the market, so I won’t spoil much here. To get started, pay attention to where they tend to show up. Basic web sleuthing skills will serve you well. You don’t need any advanced skills. Those of us that get accused of having “insider” knowledge or access don’t have it – we’re just good at using the internet.
Also I will note here that paying to have access to Ras early is not as huge an advantage as it seems, at least when it comes to the RCP TA and 538 markets. First, many players have access to these polls early. And, secondly, they’re all quite fast and quite good. So you’re competing for a limited pool of available shares to get to the appropriate market pricing versus some of the better players. Before I ever had access to Ras, I was able to learn to play fine just by studying market pricing.
(Tip: the market pricing in Ras or RCP TA on Thursday night will generally tell you what is expected to happen with Ras on Friday morning, and the market movement shortly before 9am will tell you what actually happened.)
You’re going to want to have a way to refresh web pages automatically
Yeah yeah, the veterans don’t like talking about this publicly, but it’s pretty much super common knowledge anyway. You really do want to find a way (google for it – not difficult) to automatically refresh web pages and check for changes to those pages. I will leave it as an exercise to the reader as to why this might be useful…