Prediction markets let you trade on the outcome of real-world events. While they can be an engaging way to express a view, they carry real financial risk. You can lose some or all of the money you put in.
Key risks to understand:
- Loss of capital — Positions can go to zero. Never trade with money you cannot afford to lose.
- Emotional decision-making — Chasing losses or over-trading after a win are common patterns that increase risk.
- Illiquidity — Some markets may have low liquidity, making it difficult to exit positions at a fair price.
- Compulsive behavior — Trading can become addictive. Recognize the signs early and set boundaries.