> This is the sort of thing that only works if hardly anyone is doing it
In fact, it's just the opposite.
If "hardly anyone is doing it", you can, in fact, distort a prediction market pretty easily. If you have the money to throw at it, nobody is going to stop you.
If absolutely everybody is doing it, though, the situation changes. Somebody whose pockets are just as deep as yours will eventually discover what you're doing. It is in their best interest to trade against you and bring the market to where it should be.
This is one of the reasons penny stocks are so much worse than Aapl or SPY. Penny stocks have very low trading volumes and very low interests, so it's pretty easy for a motivated player to distort their price, "pump and dump", or do other shenanigans of the sort. There are so many people trading on aapl that you can be pretty sure the current price represents the market consensus of what aapl is currently worth.
In fact, it's just the opposite.
If "hardly anyone is doing it", you can, in fact, distort a prediction market pretty easily. If you have the money to throw at it, nobody is going to stop you.
If absolutely everybody is doing it, though, the situation changes. Somebody whose pockets are just as deep as yours will eventually discover what you're doing. It is in their best interest to trade against you and bring the market to where it should be.
This is one of the reasons penny stocks are so much worse than Aapl or SPY. Penny stocks have very low trading volumes and very low interests, so it's pretty easy for a motivated player to distort their price, "pump and dump", or do other shenanigans of the sort. There are so many people trading on aapl that you can be pretty sure the current price represents the market consensus of what aapl is currently worth.