Polymarket Trading Strategy

When to Use

• Evaluating prediction market opportunities
• Deciding between YES and NO positions
• Timing market entries and exits
• Researching event outcomes

Core Principles

1. Edge Requirements

• Only trade when you have information edge
• Market is efficient - obvious mispricings are rare
• Your edge: faster research, domain expertise, contrarian view

2. Position Sizing

• Max 20% of polymarket balance per market
• Diversify across 3-5 uncorrelated events
• Higher confidence = larger position (up to limit)

3. Time Horizon

• Short-term (<1 week): News-driven, volatile
• Medium-term (1-4 weeks): Event-driven, research edge
• Long-term (>1 month): Capital inefficient, avoid

Market Selection Criteria

Good Markets

• High liquidity (volume > $100k)
• Clear resolution criteria
• Reasonable time to resolution
• Mispriced based on your research

Avoid These Markets

• Low liquidity (wide spreads eat profits)
• Ambiguous resolution criteria
• Very long duration (capital locked)
• Markets you have no edge on

Research Framework

1. Gather Information

• Official sources (government, organizations)
• Expert opinions
• Historical precedent
• Sentiment analysis

2. Assess Market Pricing

• Current YES/NO prices
• Historical price movement
• Volume and liquidity depth
• Spread between bid/ask

3. Calculate Expected Value

EV = (Your Probability × Win Amount) - (1 - Your Probability × Loss Amount)

Only trade if EV > 5% of position size

Entry Strategies

Contrarian Entry

• Market overreacts to news
• Price moves >10% on low-quality information
• Fade the move if fundamentals unchanged

Momentum Entry

• Clear trend forming
• New information validates direction
• Enter on pullback, not breakout

Value Entry

• Market significantly mispriced vs your research
• No immediate catalyst needed
• Patient accumulation over days

Exit Strategies

Take Profit

• Scale out as price approaches your target probability
• Leave 20% runner for full resolution
• Don't get greedy near 90%+ levels

Stop Loss

• Exit if thesis invalidated by new information
• Exit if better opportunity emerges
• Don't average down on losing thesis

Warning Signs

Avoid Markets With

• Resolution disputes ongoing
• Manipulated volume (wash trading)
• Unclear or changing rules
• Your edge is "it feels wrong"

Red Flags in Pricing

• 95%+ certainty = little upside, max downside
• Price hasn't moved on major news = you're missing something
• Extreme volume spike = informed traders know something

Checklist Before Buying Shares

• Liquidity adequate (spread < 5%)
• Resolution criteria clear
• Time to resolution reasonable
• Your probability differs from market by >10%
• Research documented (not just vibes)
• Position size <= 20% of balance
• EV calculation positive