Prediction Markets 101

Interactive Brokers’ ForecastTrader offers investors a groundbreaking way to profit from their predictions on political, economic, financial, and environmental events through innovative Prediction Contracts. Prediction Markets enable the investor to take yes-or-no positions on elections, economic indicators, Fed decisions, and climate trends while strictly limiting their risk, the maximum loss per contract is capped at the initial investment, with contracts priced between $0.02 and $0.99. For each contract that expires “in the money,” the investor receives a fixed $1.00 payout, and they can close positions anytime by buying the opposite side. Available 24/6 across IBKR’s professional desktop, mobile, and web platforms, Prediction Markets also offers an interest-like incentive coupon that accrues daily on the closing position values and pays monthly. Whether tracking the US Presidential Election, Real GDP figures, or Fed Funds rates, Prediction Markets transform the investor’s market insights into actionable trades with transparent pricing, limited downside, and seamless platform integration.

Please refer to the end of the article for ways to access the ForecastTrader on all Interactive Brokers’ platforms.

Once the ForecastTrader screen appears the investor will see Prediction Markets on Government, Economic Indicators, Elections, Technology Financial Markets, Environmental, and CME Event Contracts.

Source: ForecastTrader

The investor can select any of the categories to see the full array of contracts available or select “Popular” to see a selection of popular contracts from each area. If the investor clicks one of the sectors like “Economic Indicators”, they will see a subset of topics to select contracts from Education, Housing, Industry, Interest Rates, Labor, Oil & Energy, Prices & Inflation, Sentiment Surveys, and Taxes.

Source: ForecastTrader

The investor can choose list or tile view and sort by alphabetical order or open interest. On the display are the prices for Yes and No contracts, the open interest and any position the investor may have in the contract. When they select a contract under Sentiment Surveys such as “US Consumer Confidence Index”, the ForecastTrader screen updates to display comprehensive information about that specific prediction market. The interface is designed to provide all the essential data you need to make informed trading decisions.

Left Panel Navigation

On the left side of the screen, the investor will find a list of all available thresholds or outcome dates for each event. They simply click on any outcome to view its detailed information and price history.

Chart and Price History

At the top of the screen, a chart displays the price history for the selected outcome. The investor can choose between underlying and contract data. In the contract data chart, the investor can toggle between viewing the “Yes” or “No” side’s price history by clicking the respective buttons, allowing them to analyze both sides of the market.

Source: ForecastTrader

Activity Panel

Directly below the chart, the activity panel provides a real-time view of:

• Current positions
• Open orders
• Completed trades

Event Information and Market Rules

Scrolling further down, there is a detailed explanation of the event. There’s also a link to access a comprehensive PDF containing all Market Rules governing ForecastEx prediction market contracts.

Contract Timeline and Specifications

The contract timeline is clearly displayed, showing:

• Last date and time for trading
• Results release date
• Payout schedule

The investor can click “View Trading Schedule” to access the complete trading schedule.

Below the trading schedule, they’ll find detailed contract specifications, including:

• Market name
• Measured period
• Minimum tick
• Additional contract details

Data Sources and Resolution

The Data & Resolution section includes a link to the source agency for the contract. Click this link to verify the official data source used for contract settlement.

Source: ForecastTrader

Why Understanding Market Rules is Essential

Understanding the market rules is critical for two key reasons:

1. Contract Specifications

ForecastEx prediction market contracts are based on the probability of specific events occurring, including economic indicators, political outcomes, or environmental results. Each contract features a specified payout structure, typically ranging from $0.02 to $0.99, with a potential settlement payment of $1.00 if the investor’s prediction proves correct.

2. Regulatory Compliance

ForecastEx operates under regulations established by the Commodity Futures Trading Commission (CFTC). Understanding these regulations ensures you comply with legal requirements and protects the investor from fraudulent activities.

How to Place an Order

Buying a Contract

1. Scroll up to the chart area and the investor can click either the Green “Yes” button or the “No” button to create an order ticket for their desired position
2. Enter the order details:
   • Maximum (limit) price they’re willing to pay
   • Number of contracts they wish to purchase
   • The trade value automatically populates in the Amount field based on your inputs
3. Select Time in Force from the dropdown menu:
   • Day
   • Immediate or Cancel (IOC)
   • Good Till Cancelled (GTC)
4. Review the order impact:
   • Potential Profit
   • Maximum Loss
   • Estimated Total (if the order fills)
5. Preview and submit:
   • Click “Preview” to see the account impact if the order fills
   • Click “Transmit Buy Order” to submit for execution
   • Click “Done” to complete the process

Source: ForecastTrader

Once submitted the investor can share their trade idea with friends by clicking on the “Share via email” button that appears on the order ticket.

The investor can view open positions by clicking the Portfolio button and reviewing the Positions tab. Investors can adjust or close open orders from the Orders tab. Completed trades are displayed on the Trades tab.

ForecastTrader by Interactive Brokers simplifies prediction market trading, allowing investors to express views on political, economic, financial, and environmental outcomes with defined risk and full transparency. Risk is capped at the initial investment, with a clear $1.00 payout for correct outcomes, making prediction market trading intuitive and accessible. Backed by CFTC oversight, transparent market rules, and seamless integration into IBKR’s trading ecosystem, ForecastTrader enables investors to turn informed insights into actionable strategies with confidence and control.

Please see below for ways to access ForecastTrader from Interactive Brokers full suite of trading platforms.

Accessing ForecastTrader to Trade Prediction Markets on IBKR’s Platforms

Investors can access the ForecastTrader on the Trader Workstation in two ways. First, on the upper left-hand side of the screen, click on the ForecastTrader button. Or the investor can click on the New Window button, scroll down toward the bottom and select IBKR ForecastTrader.

Source: IBKR TWS

In IBKR Desktop the investor clicks on the Sitemap icon on the bottom left-hand side of the screen, then clicks on ForecastTrader in the “Trade” section.

Source: IBKR Desktop

In the Client portal the investor can click on the “Trade” header and select ForecastTrader.

Source: IBKR Client Portal

In the IBKR Mobile app, the investor can click on the “Trade” icon, then click ForecastTrader.

Source: IBKR Mobile