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  Prediction Market - Trading Strategies  
  Homework!
  Buy and hold
  Weekly allowance
  Limit vs. Market
  Market Maker
  More

  FAQ
You've decided to try out trading at Cenimar. You want to make money. So, how do you go about it?

This page gives you some suggestions.

   Do your homework!    
All the Contracts for sale at Cenimar have a fixed number of Options. Each Option provides one prediction about the future. Most (but not all) trading strategies require you to estimate which Option is most likely to be correct.

Each Contract comes with a web page that describes the details of the Contract including the prediction range for each Option. (Click on the Available Contracts link and then click on any individual Contract to get the details of that contract.)

These detail web pages also contain an evaluate link and a small graph showing historic data. Click on either the link or the graph to go to an interactive graph that shows more details about the history of the data being predicted.

Financial service providers in the US are required by law to accompany similar graphs with disclaimers that effectively say "past performance is no guarantee of future results". But, in Cenimar's case, past performance is often the perfect starting point in predicting future values.

Use this historic data, and any personal information you have access to, to come up with your best estimate about the future, then use all of that information to help you select the Contract predictions that you think are most likely to come true.

   Buy and hold    
One of the simplest trading strategies is to choose the Contracts you want to invest in, pick one or more Option in each Contract (based on whether you think the prediction is likely to come true), buy Shares in those Options and hold them until the Contract is closed.

If you buy the Shares as soon as possible after the Contract is released, it's likely that (for a standard Contract that has 7 Options) you'll pay about I$1.43 per Share. (That's one seventh of ten dollars.)

When the Contract is closed, Shares in the correct prediction are worth I$10.00 - about a 700% increase over the original value.

How many different Options should you buy?

Think about it this way: If you buy one Share in all 7 Options of one Contract and hold them until the contract closes you'll probably pay more than I$10.00 for the original Shares but will only earn I$10.00 when the Contract closes. (Since only one Option can be correct.) So, this is not a good strategy.

If you buy only one Option, you need to be 100% correct to make money. But you do earn most money.

If you buy the Option you think is most likely and also buy the Options on either side of your main prediction then you can still make about 300% on your investment if any of the three Options is correct.

Note: if you purchase shares in a Contract close to it's closing date it's likely that the purchase price per Share may be much closer to I$10.00. So the potential benefit of picking the correct result will be reduced significantly.

   Your Weekly Allowance    
Don't forget that every week you login to Cenimar and trade on the Prediction Market you are given a weekly allowance of up to I$40. If you trade (buy and sell a combined total of) at least I$40, you get the full allowance. If you trade less than I$40 then your allowance is limited to the sum of your trades. (It can take a few hours for the allowance to be credited to your account if you have not logged in for over a week.)

This means that the more you use Cenimar, the more money you have to invest and the more money you invest, the more likely you are to pick an Option that will provide a good return on your investment.

There is no interest on your I$ balance. (Don't complain: it's only play money and we give it to you for free anyway!) So, the only way to increase your portfolio balance is to purchase Shares that you think will increase in value.

   Limit vs. Market Order    
When you place an order to purchase Shares at Cenimar you can place a Market Order or a Limit Order.

A Market Order accepts the best available trade price. Market Orders often trade immediately (within a few minutes). However, it will not trade immediately if a matching order is not available.

When you specify a Limit Order you specify the maximum amount you will pay to buy or the minimum amount you will accept for a sale. When you specify a Limit Order you are often setting up an order that will be filled some time in the future when someone else submits a matching order.

The easiest way to trade is to use Market Orders. However, this can lead to trades at prices significantly different from the last trade price - especially in low volume Contracts.

Consider the situation where you place a Market Order to Buy some shares when there is no Sell Order open. (Or if the existing Sell Order gets traded before your Market Order gets a chance to trade.)

In this case, someone could place a Limit Order to Sell at a price much higher than the last trade - and your Market order would end up buying Shares at that higher price. (Limit Orders dictate the price - Market Orders accept the best price available.)

You should consider trading with Limit Orders. This protects you from unexpected price swings resulting from low volume trading.

   Market Maker    
This is one strategy that may not require you to predict the correct Option.

In this case you skillfully submit both Buy and Sell Limit Orders for the same Option at the same time. (The Buy Limit Order must be at a lower price than the Sell Limit Order or the order will not be accepted since it could result in a self-trade.)

You are making a market in the Option since anyone else can now either buy or sell the Option (at your price). (If there is no buy or sell orders open at any time then we would say that there is effectively no market for that Option at that time.)

With this strategy you are banking on the fact that there will often be someone who is selling an Option for some reason (perhaps to buy a different one). So, every time you buy low and sell high you earn income (the difference between the buy and sell price), even if the average price of the Option does not change much.

With this strategy the skill comes from setting buy and sell prices that beat your competition (other traders using a similar strategy) but also provide you with a significant margin on each buy and sell.

It's possible that you'll need to be quite active in changing the price of your open buy and sell orders to track changes in the market.

With this strategy it's possible that you won't hold the Shares until the Contract closes. You might try to sell all Shares before that time after making your profit during the lifetime of the Contract.

Most markets rely on Market Makers to ensure that a trading opportunity is always available for other traders.

Cenimar will soon release some tools to formalize and simplify the role of the Market Maker.

   More    
If you need more general information about Futures Markets, try reading the document Understanding Opportunities and Risks in Futures Trading by the National Futures Association.

Although this 50 page pdf document is designed to provide information about the commercial US Futures Markets, it also provides background information that might be interesting to users of the Cenimar Prediction Market.

Note that some of the warnings in this document about losing much more money than your original investment do not apply to the Contracts available at Cenimar. At Cenimar, if you purchase Shares in any Contract, you can lose your original (I$) investment. But you never lose more than that. And, of course, at Cenimar you are investing play money (I$) not real money!


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