Author: Changan I Biteye Content Team
In the previous article from Biteye, we introduced the basic arbitrage logic of prediction markets. (Related reading: Breaking Down the Five Major Arbitrage Strategies of Polymarket: How Can Ordinary Players Seize Million Dollar Opportunities?) For advanced traders, the core of profitability on Polymarket is no longer just event prediction, but rather systematic arbitrage based on information transmission hierarchy, contract parsing boundaries, and probability mismatches.
While ordinary investors obtain lagging information from social media, professional traders have already harvested pricing discrepancies by monitoring raw data sources before market consensus is reached.
In this article, Biteye will take you deeper:
Information Transmission Hierarchy: Seizing the first point of raw data to implement rapid trading strategies similar to "equation news."
Top Trader Cases: Analyzing the automated models and contrarian sentiment strategies of million-dollar winning players.
Pitfall Guide: Analyzing UMA adjudication logic and contract loopholes to avoid the settlement risk of "facts established but adjudication failed."
I. Strategy Advancement: What Are the Experts Still Playing?
Information Traceability: Seizing the First Point of the Communication Chain
The price fluctuation logic of prediction markets can be simplified to: real events -> raw data flow -> social media -> trader decisions -> on-chain order matching -> price changes.
The earlier you obtain the raw data flow, the greater your price advantage.
Blogger @QuantVela: Each market on Polymarket corresponds to a vertically authoritative resolution source, but these websites often do not have public APIs, and the documentation is incomplete. At this point, writing emails to inquire can potentially connect you to the source data.
In prediction markets, the position of information on the timeline is very valuable; the closer it is to the front, the more likely it is to replicate "equation news" and become the Vida of prediction markets.
Locking in Certainty: Dissolving the Time Dimension of Tail-End Trading
In prediction markets, many people are obsessed with tail-end trading, taking large positions for a 1% profit when victory seems to be at 99%. However, this approach can lead to your profits instantly returning to zero with just one reversal.
Tail-end trading is not impossible; it’s about finding the right market.
The price in prediction markets essentially prices possibilities. When an event is nearing its end, there is insufficient time to support the occurrence of variables.
For example:
In a football match, if the leading team maintains a two-goal advantage in the last minute.
In a LOL match, if one team has been completely wiped out, and the other team’s five heroes are attacking a crystal with only 10% health left, with no one on the opposing side reviving.
Or: The fact has already occurred and has been announced, but due to processes, the market is still in an unresolved state.
- In the election prediction market, if the candidate's lead in votes > remaining uncounted votes.
Effective tail-end trading is not about betting on probabilities but rather on the physical impossibility of events. Only when time can no longer support any variables (such as reversals or comebacks) does this small profit become true certainty.
Volatility Arbitrage: Capturing Irrational Premiums
In the 15 Min price prediction market for BTC, when the price of BTC rises or falls rapidly, buy the low side, then hedge by buying the opposite side, ensuring the total cost is below $0.95 to lock in a 5-10% profit.
For example: When BTC's price drops, the probability of an Up in 15 Min may irrationally adjust due to panic. The probability follows the price down.
At this point, buy the Up position at the irrational price, and when the market stabilizes, buy Down at the normal price, ensuring that the Up and Down positions remain consistent and the total cost is less than $0.95.
This strategy is similar to grid trading, buying low and selling high, without guessing the direction, and laying out positions in both directions to convert volatility into price differences.
Small Tips: This strategy is only suitable for volatile markets. In recent one-sided downtrends, there are always bets on the Up probability, leading to a low correlation between probability and price, often resulting in Up price premiums.
Low-Price Range Market Making: Profiting from Bid-Ask Spreads in Niche Markets
In Biteye's previous article, we briefly mentioned the logic of this strategy, where there are arbitrage opportunities in newly launched or illiquid markets on Polymarket, using bid-ask spreads to earn intermediate profits.
It should be added that:
Only operate in markets that will not settle immediately to avoid forced liquidation due to quick event outcomes.
Focus on low-price ranges (1-5 cents), as these micro-price points usually have lower liquidity and larger spreads, making it easier to see significant bid-ask differences.
The bot sees the current bid price, for example, 3 cents → immediately buys at the bid price.
Then immediately sells at the ask price, for example, 4 cents. Each time locking in about a 1 cent spread.
The essence of this strategy is to provide liquidity to low liquidity markets, achieving profit stacking through high-frequency capture of small bid-ask spreads.
II. Real Case Review: How Top Traders Made Millions on Polymarket?
Deep Imbalance: Capturing Probability Mismatches in Prediction Markets (Total Profit $70,000)
Real-time monitoring of the depth order book on Binance spot or contracts, focusing on the distribution of buy and sell orders, depth, and buy/sell imbalance, to judge the trend of the cryptocurrency's 15 Min price prediction market from the data.
If the buy orders are significantly more and closer to the current price, or large buy orders are piling up → judge that the short-term upward probability is higher.
If the sell orders are more and the order volume is larger → judge that the short-term downward probability is higher.
When the short-term directional signals shown in the order book are strong enough, the bot will quickly buy the undervalued side (e.g., buy Up) and swiftly sell to close when the Polymarket price corrects and returns to a level reflecting the true probability.
The essence of this strategy is to utilize leading data from high liquidity markets (Binance) to harvest the delays in price discovery in low liquidity markets (Polymarket).
Contrarian Sentiment Strategy (Total Profit $1.45M)
Trader anoin123, with a total profit of $1.45 million, demonstrated an extremely profitable logic in prediction markets: harvesting collective panic.
He specifically selects binary markets with clear deadlines, such as:
Will the U.S. strike Iran before X month X day?
Will Israel strike Iran before X month X day?
Similar high-profile events like government shutdowns or regime changes.
When news headlines, social media panic, or escalating tensions occur, retail investors rush into the YES direction, pushing the YES price up to 70–95¢, while the NO price is severely depressed (usually to 5–40¢).
People tend to overestimate the probability of extreme events occurring in the short term while underestimating the significant inertia of maintaining the status quo in geopolitics.
He does not bet on the geopolitical outcome itself but rather on the market's overreaction returning to rationality, meaning that nothing will happen.
As the deadline approaches, as long as war has not broken out, the price of No will naturally rise with the passage of time.
When the initially panicked news subsides and rationality returns to the market, he can also sell when No rises to normal levels.
In summary: he is betting on the irrational premium caused by market panic.
Capturing Certainty Windows Before Consensus Forms (Total Profit $1.09M)
In Biteye's previous post, we introduced "news trading" in subjective trading on Polymarket, and this time we present "information arbitrage."
chungguskhan only places heavy bets on high-certainty events, all with six-figure positions.
Polymarket U.S. launch market: invested $242K to buy YES (entry price about 50¢), earning $380K (ROI 57%).
Joshua vs. Paul boxing match: $69K entry at 49¢, earning $141K (ROI 103%).
These are not blind bets but rather capturing the price difference within the time window between "information known only to a few" and "market consensus."
For example: Regulation has been approved, but the official press release will not be published for several hours or days.
Small Tips: Of course, there are many insider trading and rat trading in prediction markets. Taking the latest product launch as an example, a launch event usually requires coordination among PR firms, media, downstream manufacturers, logistics, and more. In this collaborative network, leaks are hard to avoid. Therefore, for such markets, one can pay attention to the betting situation of new wallets.
III. Pitfall Guide: How to Avoid Traps in Prediction Markets?
Consensus Is Not Profit; Deviations Are
In Polymarket, the formula that easily creates illusions for newcomers is: "I think there is a 99% chance it will happen, and the current price is $0.99, so this is free money." In fact, this often marks the beginning of losses.
The probability reflected in Polymarket is the consensus of traders, not the objective probability.
If the Yes pricing in the Polymarket is 0.99, and the actual probability of this event occurring is also 99%, then your expected return for betting on this Yes is 0, not 1%.
Small Tips: Look for pricing errors; only when you believe the actual probability is 90%, and the market pricing is only $0.70, does that 20% deviation become your profit.
Sell Expectations, Avoid Holding Until Settlement
The biggest risk lies in unexpected losses at settlement due to ambiguous rules, unreliable sources, or disputes. It is advisable to sell early for profit when the market is still emotional.
Polymarket once had a market: Will TikTok be banned before January 19, 2025?
In fact: On January 19, 2025, major app stores in the U.S. (Apple, Google) did indeed remove TikTok from downloads, and the government officially initiated the ban, preventing new users from downloading and limiting certain functions for old users. In everyone's common sense, this has already been considered a ban.
However, in UMA's rule description, the definition of a ban is very strict—it must be completely inaccessible or cease operations entirely.
UMA's voters ultimately determined that this did not meet the strict definition of a ban. As a result, all those who bet YES lost their entire stake, even though they had already seen the ban take effect in the physical world.
Study Settlement Rules, Not Just Follow Announcements
Before placing bets, it is essential to study the rules of the market.
Polymarket once had a market: "Will Monad airdrop in October?"
On October 9, Monad officially posted: The airdrop claim website will open on October 14. Logically, the Yes for Monad's October airdrop should rise to $1, but in reality, it did not.
The reason is that the rules state: only when users receive the airdrop and it is in a tradable state is it determined as Yes. As a result, the price of Yes surged after news trading and then fell back.
Small Tips: Pay special attention to "Source," "Definition," and "Timezone." Be wary of "word games": especially regarding verbs like "airdrop," "ban," and "launch," always check whether it refers to "announcement" or "completion of substantive action."
Interesting Data
Similar to the previous Biteye article stating: "According to Dune's data, the accuracy rate of Polymarket in the 4 hours before settlement is 95.4%."
It has been found that 79.6% of markets in Polymarket are classified as No.
This is not without basis: No mathematically and logically encompasses more possibilities than Yes.
Avoid Blindly Following Trades While Ignoring Execution Details
Seeing a wallet with a 99% win rate or huge PnL on the leaderboard, the first reaction should not be to Copy Trade. Avoid blindly following trades in prediction markets.
Many high-win-rate wallets are essentially delayed arbitrage bots, and these profits only exist in specific millisecond windows. Blindly following trades will only provide liquidity to these bots.
Small Tips: Before following, check the trading frequency, single transaction size, and historical drawdowns. Following subjective traders will yield better results.
In Conclusion: In Prediction Markets, Strategy is the Core Method for Stable Profitability
If in Biteye's previous post we introduced the basic entry points of prediction markets, then this deep dive aims to unveil the trading strategies of Polymarket.
From a first principles perspective, prediction markets are essentially pricing the flow of information and rewarding cognitive depth.
After analyzing so many Polymarket cases, Biteye found that Polymarket is forming a unique ecosystem: it fairly rewards every strategist. Here, everyone's strategy is different:
Some focus on information arbitrage, making money from time differences.
Some monetize cognition by analyzing event odds.
Others summarize patterns and bet on the possibility of event reversals.
Although the focused tracks vary and strategies differ, the commonality among these winners is: they never bet on luck, only on the certainty of events.
Perhaps the most fascinating aspect of prediction markets is that it provides a direct path for cognition to be monetized.
May you build your own certainty model in the market of probabilities.
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