Join Us
Traders are the most important component of any prediction market. Through their participation, they reveal their beliefs about the future event of interest. Participants buy contracts that they perceive to be undervalued based on their current information and sell when the reverse is true. In the process, market prices are bid up or down until they reflect a consensus view. This consensus view is the market’s “prediction” of the event of interest.
Participation does not require any background in financial markets.
How the market works:
Individuals interested in trading complete an on-line application form (accessed below), which is then screened by the market managers. After an application is approved, an account is created for the trader, an initial investment deposit of an artificial currency is entered into that account and the trader is sent a login ID and password by email. The trader then connects to the market whenever she chooses using a standard web browser.
On the market a trader can enter transactions in two ways: (1) the “Electronic Broker” or (2) the “Trading Screen”. Using the Electronic Broker is the easiest and least time consuming method. It requires only that the trader complete a simple online form. Using this form she enters the probability that a certain outcome will come true. The Electronic Broker takes it from there. It automatically enters orders on the market, offering to buy at prices just below the stated probabilities and to sell at prices just above.
Alternatively, traders can enter their own orders using the Trading Screen. They enter individual orders to buy or sell shares at prices that reflect their beliefs about the likelihood of the event in question. The Trading Screen is also accessed using a standard browser. Some traders find the Trading Screen to be the more interesting method and the one which gives them the most control. However, it does require somewhat more time and greater knowledge of financial market concepts.
By either method, purchases made on the account are charged to the trader's balance, and sales are credited to it. At a specified date related to the event in question, trading ceases. When the outcome becomes known, shares held by traders are liquidated, with each share earning a value determined by the outcome of the event. Those liquidation values are deposited in the trader's account. At the completion of a full set of markets, all trading ceases and the balances remaining in each trader's account represents the trader’s final earnings.
The Role of Money:
Some prediction markets use real money. However, this project does not accept money from traders. Legal constraints and the ethical environment surrounding health related issues argue against allowing participants to invest their own money in these markets. One of the research questions addressed in this project is whether real money is necessary for accurate predictions. Thus, in some of our markets, the final balance remaining in a trader's account will be converted from the artificial currency to U.S. dollars, and an educational grant equal to that account balance will be issued to the trader. A research grant from the Robert Wood Johnson Foundation will be used to fund those payments. Traders are informed in advance of the financial terms of each market.
Time Requirements:
Participation will require less than 5 minutes per week. Our goal is for each trader to submit a full set of orders on the market at least once each week, although the frequency and timing of trading is completely up to the trader. Our experience with the Electronic Broker is that the process of entering a complete set of orders requires no more than a few minutes. The trading screen approach may require five to ten minutes for a comparable level of activity.
Knowledge Requirements:
No knowledge of finance is required for participation, particularly for traders who use the Electronic Broker to enter their orders. Those traders simply tell the broker what they believe about the event in question and the broker translates those beliefs into market actions according to fixed rules. Some elementary financial terminology is used by the Trading Screen approach, but in the past many successful participants have used the Trading Screen with no formal background in financial markets.
