How to Place Your First Prediction Market Trade
A step-by-step walkthrough for new Kalshi users. No jargon — just the four things you need to understand before putting any money on the line.
1. How a Prediction Market Trade Works
Every Kalshi market is a YES/NO question. You buy YES if you think the event will happen, or NO if you think it won’t. Each contract pays exactly $1 if correct and $0 if wrong. The price you pay is the market’s implied probability. (You may also hear these called event contracts — that’s the term Robinhood uses. Same concept, different name.)
Sample Kalshi Market
Will the temperature in NYC exceed 80°F on July 4?
YES
65¢
65% implied probability
NO
37¢
37% implied probability
| If you buy YES at 65¢ | Payout | P&L |
|---|---|---|
| Event happens — you win | $1.00 | +$0.35 |
| Event doesn't happen — you lose | $0.00 | −$0.65 |
Fees not shown. Actual P&L will be slightly lower after Kalshi’s taker fee. See Fees Compared →
Notice YES (65¢) + NO (37¢) = $1.02, not $1.00. That 2¢ gap is the bid-ask spread — the cost of immediate execution. Most Kalshi markets carry a small spread built into the prices.
2. Reading the Odds
A contract priced at 65¢ means the market collectively estimates a 65% probability the event will happen. The price and the implied probability are the same number.
This is where you find value: if you believe the true probability is 80% but the market is only pricing it at 65%, you have a potential edge buying YES. You’re getting paid 65¢ for something you think is worth 80¢. If you think the true probability is only 50%, the 65¢ price is expensive — consider buying NO at 37¢ instead.
3. Is This Trade Worth It? (Expected Value)
Having an edge isn’t enough — you need to quantify it. Expected value (EV) is the average outcome of a trade if you could repeat it many times. A positive EV means the math favors you over time; negative EV means you’re paying the house.
The formula is simple:
For our NYC weather example — buying YES at 65¢ when you think the true probability is 80%:
| Component | Value |
|---|---|
| Your probability × profit (win side) | 80% × $0.35 = $0.28 |
| Miss probability × cost (lose side) | 20% × $0.65 = $0.13 |
| Expected value | $0.28 − $0.13 = +$0.15 |
This example ignores Kalshi’s fees. The EV Calculator includes them automatically.
Run your own numbers in the EV Calculator →4. How Much Should You Risk? (Kelly Criterion)
Even a positive-EV trade can destroy your bankroll if you bet too large. The Kelly Criterion tells you the optimal fraction of your bankroll to risk on a given trade, based on your edge and the odds.
Betting full Kelly is mathematically optimal in the long run but creates large swings that are uncomfortable in practice. Most traders use quarter Kelly or half Kelly — a more conservative fraction that gives up some expected growth in exchange for a smoother ride. If you’re uncertain about your probability estimate (which you should be), fractional Kelly is the right default.
For the NYC weather trade with a 15¢ EV on a 65¢ stake, full Kelly suggests risking roughly 23% of your bankroll. Quarter Kelly brings that to about 6% — a much more sensible single-position size.
Size your position in the Kelly Calculator →5. Recap & Get Started
Before placing any trade, run through these four steps:
- 1
Understand the contract — price = implied probability, wins pay $1, losses pay $0
- 2
Read the odds — compare the market price to your own probability estimate to find an edge
- 3
Check EV — calculate expected value after fees; only trade when EV is clearly positive
- 4
Size the position — use Kelly (or a fraction of it) to determine how much of your bankroll to risk
Risk disclosure: This guide is educational and does not recommend that any reader open an account or place a trade. Prediction market trading involves risk, including the risk of losing your entire investment. Most retail traders on prediction markets lose money over time, particularly after fees.
Ready to trade? You can open an account at Kalshi here.
Disclosure: We may earn a referral commission if you sign up through links on this page. That does not affect our editorial content, rankings, or tool methodology.
Explore all tools →Frequently Asked Questions
Common questions about prediction market trading, expected value, and position sizing.
How do prediction markets work?
Prediction markets let you trade contracts on real-world events. Each contract pays $1 if the event happens, $0 if it doesn't. The price of the contract — say, 65¢ — reflects the market's collective implied probability that the event occurs (65%). You profit when your probability estimate is better than the market's.
What is expected value in trading?
Expected value (EV) is the average outcome of a bet if you could repeat it infinitely. A positive EV trade means the mathematical return exceeds the cost over time. EV = (your probability × profit) − (miss probability × cost). A trade is worth taking when EV is positive after accounting for fees.
How much should I bet on a prediction market?
The Kelly Criterion gives you the mathematically optimal fraction of your bankroll to risk based on your edge and the odds. Most traders use a fraction of Kelly (quarter or half) for conservative sizing. Never risk more than you can afford to lose entirely.
What fees does Kalshi charge?
Kalshi charges a taker fee calculated as: Fee = 0.07 × Price × (1 − Price). At a 50¢ contract, that's 1.75¢ per contract. Fees apply on both entry and exit if you close early. Always factor fees into your EV calculation before placing a trade.
Want to start trading? Visit Kalshi here.
Disclosure: ChanceMetrics may earn a referral commission if you sign up through this link. This does not affect our editorial content, calculator methodology, or how we evaluate platforms.
Keep reading
Educational content only. This guide is for informational purposes and does not constitute financial, legal, or tax advice. Prediction market trading carries significant risk. Examples shown are hypothetical and do not represent guaranteed outcomes. Always consult a qualified professional before making financial decisions.
ChanceMetrics builds free educational tools for understanding prediction market pricing. Our tools are educational resources and do not constitute personalized financial advice.