Part Two: How to Actually Play
By jipkin, May 2018
(This guide is intended for those that know or have read about the basics of tweet markets, discussed here.)
Okay so you’ve read about the basics, you get the gist, you want to make some money. How do you profit on the PredictIt tweet markets? This half of the guide covers basic strategies, tips, tricks, etc. It’s not exhaustive – there are as many ways to play a tweet market as there are players playing them (if not more!). But hopefully if you’re new (or even a little bit experienced) you can find something here that helps you find a playstyle that works.
Know thyself and manage thy bankroll
As with any “investing” (or gambling, if you like being honest with yourself) in any market type (whether on PI or elsewhere), you should really develop a good sense of what your own tendencies are and what you intend to get out of your experience interacting with that market. If you’re a degenerate gambler that likes YOLOing it all on black, welcome! There are plenty of spots for you to play in tweet markets – but don’t be too upset if it all goes south for you either. Comes with the style!
If you’re overly cautious and hate losing money – well tweet markets can certainly accommodate you as well!
Regardless, always know how much you are willing to lose in a given amount of time. If you want to stretch $50 out over three weeks while you learn, for instance, you’re probably not well-advised to toss it all a single bracket early in the week and walk away. On the other hand if you got $50 and don’t care what happens to it, then by all means, do what you want.
Now, how do we go about making some money on the twitter habits of various Trump administration twitter accounts?
Oh I know! I should build a statistical model of past tweets and use it to predict the future! I will definitely beat everyone that way!
Listen I collect as much data as anyone and can rattle off any number of stats if you want me to. Yes, tweet counts can be described by Poisson statistics. Who cares! Let me put this as bluntly as I can:
IF YOU ARE THE KIND OF PERSON WITH THE MATHEMATICAL ABILITY AND INTELLIGENCE TO BUILD STATISTICAL MODELS OF EXPECTED TWEET COUNT, YOU ARE THE KIND OF PERSON WHO SHOULD DO VERY WELL IGNORING THAT COMPLETELY AND CHANNELING YOUR ENERGIES TOWARDS WHAT ACTUALLY MATTERS.
With that said, let’s focus on what actually matters…
Understand the pricing in the market
If you know your basics, then you know that pricing in the market is essentially integrating what it thinks the future holds on the basis of what it knows about future events and how the account has been tweeting recently.
Tweet markets are frequently dumb as rocks.
Those of us that make money at this wouldn’t be able to do it if the markets were perfectly efficient measures of reality. Mispricings are frequent and can occur at any point in the week. Early in the week, recency bias plays a huge role – if the account has been very active, high brackets will be selling for a premium early on and vice versa if the account has been quiet. Later in the week, say Monday or Tuesday of a Trump tweet market, beware the trap of thinking that just because he had a quiet or busy weekend that that trend must necessarily continue. Sometimes it does, sometimes it’s very profitable to bet against it.
Bottom line – whenever you look at a market you should, even if you can’t tell how right it is, be able to determine what the market “thinks”. For instance, you might notice that a market has B1 high early on – you should think “Huh, the market thinks it’s going to be quieter this week – I wonder why.” Then the task is on you to figure out if that makes sense.
Understand the market’s movements
IT IS WAY EASIER TO PREDICT THE SHORT-TERM MOVEMENT OF TWEET MARKETS THAN THEIR FINAL RESOLUTION.
When you’re just starting out, watch what prices do and how they move. Notice how sometimes they gain and lose 5-10c of value, even a few days in. Notice how some brackets rise and fall with tweets and with silence. Pay attention to how much they rise and fall. Pay attention to how the market reacts to breaking news – say a speech getting announced. If the market seems to overvalue one end or the other, see what events transpire later to justify that or not to see what information you might have been missing.
There’s as much to learn about market movements as there is time for you to put into it. But don’t worry if you don’t feel like it – there are still low-effort / low-time commitment strategies that can be profitable.
With the caveat that no strategy is ever truly foolproof or safe, let’s discuss a few of the safest options you have for playing tweet markets.
If you’re a very cautious player that doesn’t have a lot of time to monitor the tweets but still wants to take a little money out of the markets, negative risk might be the best strategy for you.
Tweet markets swing! If you remember from the basics guide, there are three kinds of weeks: B1 weeks, B7 weeks, and those in the middle. Most land in the middle – and these are your bread and butter if you’re looking to achieve negative risk.
What is negative risk? Negative risk, or “neg-risk”, is achieved when you own NO shares in more than one bracket at such prices that you are guaranteed to win money. For example, if you bought B1N in a market at 25c, then later bought the same number of B2N shares at 25c, the most you can lose is doubling your money! If B1 resolves YES, you lose 25c of value on your NO shares there, but gain 75c of value on your B2N shares (50c profit). Vice versa if B2 wins. And if B3 or higher wins? Well then you get the 75c profit on BOTH brackets ($1.50 profit).
In practice, you’re almost never going to get such ludicrous prices – but given how swing-y tweet markets are, it’s almost certain that you can end up with some form of negative risk. Usually this would entail buying NOs in the 70s for several mid-market brackets (and maybe an end-bracket if you’re lucky), and mid 80s or low 90s in the edge brackets. The general formula you want to follow is to subtract the price of the NO you want from 1 (giving you your profit) for each bracket. Do this for each bracket and add the results. If it’s greater than $1.09, you’re in neg-risk (it needs to be $1.10 or greater to account for the 10% fee that PI levies on profits).
Neg-risk almost always entails setting out open offers and patiently waiting for them to get filled. It’s exceptionally rare that you’ll be able to waltz into a market and just buy a full neg-risk position from shares available to purchase.
Everything above, of course, applies to any neg-risk situation. What about tweet markets specifically? With the caveat that I don’t play neg-risk very often, here are some observations that can inform your neg-risk play:
- As mentioned, beware B1 or B7 markets. If the market is never going to swing, you aren’t going to get neg-risk. And if you start by betting against the edge of a market you might well end up on the hook for an increasingly dire and inescapable position. This is where the risk of neg-risk happens – getting the position in the first place!
- The distribution of prices across the brackets in a tweet market is typically going to be a lot flatter earlier in the week than later in the week. That means if you get neg-risk early on, you’re probably missing out on an even better neg-risk position later. There is risk-reward involved in how early you establish your negative risk and the prices in each bracket you attempt to achieve.
- If you find yourself spending a ton of time perfecting your neg-risk position… neg-risk might not be for you! If you’re making constant adjustments, why not invest that time in playing both YES and NO shares and playing the swings? Neg-risk is, primarily, a strategy for those who don’t want to waste time playing every swing and want to just simply guarantee a return, even if that return is smaller than what they might have achieved by playing more actively.
Arbing is essentially the same as neg-risk, except playing on the YES side. Here you try to build up a position of YES shares across several brackets that you think the final count will land in. By ensuring that the combined price of these shares is low enough that you profit as long as one of your brackets hits, you effectively hedge your risk. In extreme cases, players have achieved full-market arbs for ridiculous prices. I saw a position once of a player who had 1000+ shares in every bracket in an RDT market for a combined price of 17c (it was a very swing-y market!). That’s rare, but it does happen.
Arbing is particularly popular for players that don’t like to fuss with tweet markets until later in the week when they can hopefully get multiple brackets cheap as their fortunes wax and wane. Note that this is inherently riskier than neg-risk! Unless you own every single bracket viable bracket for a combined price guaranteed to net you a profit (use the risk calculator that PI provides to check this!), then you are at risk if the real count exceeds or fails to reach the range you’ve bought.
Note as well that playing multiple brackets on the YES side is inherently more expensive! When buying NO in multiple contracts in a linked market, PI credits you – on the second bracket’s purchase on. Because one of your NO positions has to win, PI figures out the maximum you can lose and then credits you back the rest. No such doing on the YES side – as they can’t determine whether any of the three brackets you’ve bought YES in are going to win! So this is something to beware of if your funds are limited.
Euphemistically, this refers to the broad category of play for people that are comfortable risking some money to make some money. I’ll cover two styles here, one of which appeals to the riskier players and the other to the cautious, though the best mix elements of both.
The highest risk / highest reward strategy is to simply buy a lot of one or two brackets at cheap prices and hope they win. You would be amazed at the screenshots you see from some players that follow this basic playstyle. I’m so risk-averse I can’t do this kind of stuff myself, but it can produce some beautifully profitable, if degenerate, positions.
Of course, this behavior can range from pure dart-throwing to extremely educated guesses. There have been players that pick a single bracket early in the week, put their chips on it, walk away, and win. But there are also players that sense an extremely profitable spot by betting on unexpected activity or unexpected silence and end up reaping the rewards. Getting good at finding those spots is an ever-elusive goal of mine. The best of the best can seemingly do this consistently, though they may eat a few huge losses every now and then in pursuit of the dream.
People that play this way are also completely unafraid of taking large positions near the end of markets when movement is greatest. We’ll touch on these spots below, but the godlike HODLERS seem to have a preternatural ability to simply buy a ton of really risky shares and nonetheless ride them to profit.
If you’re not looking to build a “long-term” position (meaning a hold til close position) and if you’re the kind of person that wants to play actively but safely, in-and-out is the best course for you. This kind of play (which I do a LOT of) comprises essentially three basic moves:
If you’re the first to catch a new tweet, and you know that an additional tweet will move the market, then you can buy shares on offer and immediately sell them for profit. This is a really popular move and there is a LOT of competition! In fact, a few traders (in violation of PI’s terms of service) use scripts to automatically trade in response to tweets. You cannot beat them for speed, and they will almost always win in the juiciest spots. Still – it’s worth reviewing what these spots are and how to play them anyway.
Early in the week, markets don’t move very much on single tweets. If you slam B1N in RDT on the very first tweet of the week… nothing will happen except a YES buyer will probably be happy to get filled. On the other hand, if that single tweet somehow presages the coming of lots and lots of tweets (say a VPT that ends with “1/6″ indicating a six-parter), it can immediately cause the whole market to shift, even relatively early in the week. On the other other hand, if that single tweet somehow indicates a complete lack of future tweets (let’s say Pence tweets that he’s going on vacation and to wish everyone a happy holidays next week), then the market will react in the other way, sending brackets at the low end of the range higher.
Later in the week, each tweet becomes increasingly important. By the time you get to the final 36 hours of a tweet market, each tweet can be worth as much as 15c in movement! Unexpected sprees? Huge money for those that can fire an order off fast enough.
Eventually, you will encounter spots where a given bracket is one tweet away from dying – here you’ll notice the volume of shares available to scoop (if that tweet hits) disappears to almost nothing. And you won’t beat the auto-traders to them. Here my advice is to instead try firing at the other bracket (the one that would win) as for whatever reason the autos sometimes forget to set their scripts to that one.
Final piece of advice for React It play – read the tweets! Occasionally the content of a tweet will give away future tweets – like when an RDT ends with “….” that means a follow-up is coming and you can gamble as though the count has really increased by two instead of by one. Other times, a tweet market will be expecting a certain kind of tweet – a recap of an event, a watch live, a west wing reads from WHT, whatever. When that tweet happens prices might actually react the opposite of how you would normally expect. Expected tweets often cause little change – its the unexpected that causes markets to move.
The most reliable thing about any tweet market is that if the account goes silent, the brackets that want as few tweets as possible increase in value. In fact – they are guaranteed to increase in value – at least theoretically – because, well, you can’t go from one bracket to the next without actual tweets.
The challenge, then, is for the player to decide when a particular bracket might be a great drift candidate. How fast will its value rise? Is there a particular price ceiling it might stall out at? Are there any guaranteed tweets the market is expecting? What happens to its value if a single tweet hits? What if that tweet comes now vs in an hour or two?
Drift is incredibly profitable if managed well. At the outset, decide how long you intend to ride a drift position. What is your sell target? Will you dump some or all of the position if a tweet hits? If so, how soon would you be able to do that profitably? How many shares can you hold and escape from given what the order volume in the market suggests? If you plan to ride off into the sunset with your shares, is it worth grabbing a hedge? How many and at what price?
And don’t forget that as low brackets drift up, high brackets drift down.
Buy the fuckin’ dip. Well – this isn’t crypto or FOREX or the stock market. But there are still dips. And if you paid attention to what you’ve read about React It and Drift, you should realize that there’s a way to combine these two motifs. If you’re too slow to buy shares when a tweet hits, but don’t think many tweets are coming after, why not set a low offer, hope to get filled during the panic, and then flip those shares later once the price recovers? This play has worked since the tweet markets first arrived and continues to work today.
Of course, you DO have to have a good sense about how high/low the price in a bracket will go (whether you’re getting cheap NO or cheap YES). And you have to be willing to risk that another tweet isn’t going to arrive before the panic subsides! My recommendation is to pay careful attention to market pricing (refresh the page a lot! Check the order book a lot!) right after and in the ten minutes following tweets. You can learn this easily!
Finally, no matter what combination of these moves you decide to employ, know that risk (and reward) are highest the closer the market gets to resolution. The real money gets made in the last 24 hours (often the last six!) of a tweet market. Which takes us to the final section in this advice:
How to get absolutely cucked and lose money playing tweet markets
Everyone has lost money at some point in a tweet market. I have several losing trades every week! The key to profitability is not just to figure out how to gain money, but how to minimize your losses. How do you do this? Well just like with any investing: SET A LIMIT TO HOW MUCH YOU ARE WILLING TO LOSE ON ANY GIVEN POSITION. This is very easy to do and also very easy to fuck up or talk yourself out of. If you buy 100 shares of something at 90c, have a set condition when you’re willing to sell those shares. This could be a price trigger, this could be a number of tweets (or silence), this could be simply a period of time with nothing happening (if you’re betting against drift). Remember, those 100 shares may have cost $90, but your real risk is only $10 if you’re always dumping for 80c.
So here’s a list, in no real order, of shit that can, does, and will happen in tweet markets to cause you to lose money:
–Max NO on B1 in RDT at 90c because of course he’s going to tweet more than X times, he’s tweeted more than X times five weeks in a row. And then guess what, he goes quiet for two days in a row and you’re left waiting for a weekend miracle while your shares sink underwater and then it’s Saturday morning and the fucker tweeted a couple times but not enough and then he’s golfing and then…
–Max NO on B7 in RDT at 90c because even though he tweeted a bunch last week he’s never tweeted 70 times in over six months and even if he stays busy there’s no way he’ll have a spree like he had last week and what’s that oh he’s tweeting oh is he still tweeting oh did some idiot take the price to 20c man I wish I had set offers cheaper and what the hell where did all the Sell YES / Buy NO volume go and why is he still tweeting it’s Sunday and please could you just STOP TWEETING…
–Max NO on the sudden death bracket the night before a market closes at 95c because the account ALWAYS tweets in the morning and yeah I mean it will tweet and you go to bed and you sleep and you wake up and huh guess it hasn’t tweeted yet, well that’s fine it normally tweets by X o’clock and then it’s X:30 and you’re like are you fucking kidding me and the price is 25c and all those idiot degenerates are showing off their thousand-share single digit positions as if they’re not about to get cucked by a tweet and now it’s 10:00 AM and I guess I have to hold these all to the bitter end and be in a shitty mood all day
–Buy 40c YES on a bracket because it’s winning early on and the market MUST know something right? And why are my shares underwater I thought B1/7 was a sure thing and…
-Listen to something someone in the comments wrote and make a trade based on it because most of the time people aren’t sharing useful shit, they’re just there to entertain each other and/or desperately convince you of the value of a certain position so that their G/L looks better.
–Reason with yourself that based on past history, there’s no way X could happen.
-Reason with yourself that the account is so variable there’s no way the market can be so sure X won’t happen.
-Buy too many shares.
-Buy too few shares.
-Sell too soon.
-Hold too long.
-Refuse to learn from your mistakes. At the end of the day, you’re a person capable of learning how to do this and do it well. Getting better over time is a function of your own discipline. If you sometimes regret not making a trade – keep track of trades you wish you made and track how they work out. If you regret a trade you made – write it down and write down why and what happened to make it go sour.
Tweet markets aren’t neuroscience (that, I can tell you!). But even for those of us who literally were there when the idea for them was born and have been playing them ever since, they’re still a challenge to master.