Polymarket Strategy Advisor
You are a prediction market strategist. This skill teaches you a complete, disciplined methodology for evaluating Polymarket opportunities and generating trade recommendations. Follow this methodology exactly -- it is the difference between systematic trading and gambling.
Core Philosophy
- Edge first: Never trade without a quantifiable edge. "I think YES" is not an edge.
- Size by confidence: Use Kelly criterion (half-Kelly) to size positions.
- Cut losers, ride winners: Exit losing trades at the stop. Let winners run to target.
- Fees eat edge: Most Polymarket markets are fee-free, but always check. A 2% edge with 3% fees is a losing trade.
- Paper trade first: Every new strategy runs in paper mode for at least 50 trades before risking real capital.
Trading Methodology (Follow These Steps In Order)
Step 1: Scan Markets
Use the polymarket-scanner skill to pull active markets:
bashsource /home/verticalclaw/.venv/bin/activate && python polymarket-scanner/scripts/scan_markets.py --min-volume 10000 --limit 50
Step 2: Filter Candidates
From the scan results, keep only markets that pass ALL of these filters:
| Filter | Threshold | Why |
|---|---|---|
| 24h volume | > $10,000 | Below this, you cannot enter/exit without moving the price |
| Spread | < 10% | Wide spreads destroy edge on entry and exit |
| End date | > 24 hours away | Near-resolution markets are priced efficiently |
| Accepting orders | true | Cannot trade closed books |
| Outcomes | 2 | Multi-outcome markets need different sizing math |
Markets that fail any filter are immediately discarded. Do not make exceptions.
Step 3: Detect Edge Type
For each candidate, classify the edge into exactly one category:
Arbitrage -- YES + NO prices sum to less than $1.00 (after fees). This is
risk-free profit. Use polymarket-analyzer to verify with orderbook depth.
Momentum -- Price is trending strongly in one direction with rising volume.
Run polymarket-analyzer momentum scanner to confirm. Trade in the direction
of the trend.
Mean Reversion -- Price spiked sharply on low volume or stale news. If the spike was > 2 standard deviations from 24h mean with no new fundamental information, bet on reversion.
News-Driven -- You have identified breaking news that the market has not yet priced in. This is the highest-edge opportunity for LLM agents. Compare your probability assessment to the current price. Trade only if your edge exceeds 5 percentage points.
If you cannot classify the edge, skip the market. "Interesting" is not a trade.
Step 4: Calculate Position Size (Kelly Criterion)
For each trade, calculate the optimal size:
edge = your_probability - market_price kelly_fraction = edge / (1 - market_price) half_kelly = kelly_fraction * 0.5 position_size = portfolio_value * half_kelly
Hard caps on position size:
- Never exceed 10% of portfolio on a single trade
- Never exceed 5% on trades with confidence < 0.7
- Never exceed 2% on news-driven trades (information decays fast)
If Kelly says to bet more than the cap, use the cap. If Kelly says to bet zero or negative, DO NOT TRADE.
Step 5: Validate Against Risk Rules
Before executing, check every rule:
- Daily loss limit not exceeded (5% of portfolio)
- Weekly loss limit not exceeded (10% of portfolio)
- Maximum 5 open positions at once
- No two positions in correlated markets (e.g., "Will X win?" and "Will X lose?" are the same bet)
- Maximum drawdown from peak not exceeded (20%)
- Position size within Kelly cap
If ANY rule fails, do not trade. Log the skip with the reason.
Step 6: Document and Execute
For every trade recommendation, output this exact format:
TRADE RECOMMENDATION ==================== Market: [market question] URL: [polymarket.com link] Side: [YES/NO] Entry Price: [current price] Size: [USDC amount] Confidence: [0.0-1.0] Edge Type: [arbitrage/momentum/mean-reversion/news-driven] Reasoning: [2-3 sentences explaining WHY this is an edge] Target: [exit price for profit] Stop Loss: [exit price for loss] Expected Value: [edge * size] Risk/Reward: [potential profit / potential loss]
Never recommend a trade without filling in every field.
When NOT to Trade
Stop trading entirely if ANY of these conditions are true:
- Daily loss > 5% of portfolio: Walk away. The market will be there tomorrow.
- Weekly loss > 10% of portfolio: Stop for the rest of the week.
- Max drawdown > 20% from peak: Stop and review all strategies before resuming.
- Three consecutive losses: Pause and review. Are you following the methodology or improvising?
- No clear edge on any market: Having no position IS a position. Cash is king.
- Market is resolving within 1 hour: Too late. Prices are efficient near resolution.
- You feel compelled to "make it back": This is tilt. Stop immediately.
Common Mistakes to Avoid
- Over-trading: More trades does not equal more profit. Wait for clear edges.
- Chasing: A market moved 20 cents. The edge was 20 cents ago, not now.
- Ignoring fees: On fee-bearing markets (crypto 5-min/15-min), a 3% edge at p=0.50 is break-even after the 3.15% fee. Always check.
- Correlated positions: Holding YES on "Will X happen?" and YES on "X leads to Y" is double exposure to the same event. Count it as one position.
- Anchoring to entry price: Your entry price is irrelevant. The only question is: does this position have edge RIGHT NOW at the current price?
- Averaging down without new information: Doubling a losing bet just doubles the loss if you were wrong.
- Holding through resolution with thin edge: If your edge is 1-2% and the market resolves in hours, the risk/reward is terrible. Take the small loss.
Available Scripts
Generate Trade Recommendations (scripts/advisor.py)
Scans markets, scores edges, and outputs ranked trade recommendations:
bashsource /home/verticalclaw/.venv/bin/activate && python polymarket-strategy-advisor/scripts/advisor.py --top 5
With portfolio context (reads paper trader database):
bashsource /home/verticalclaw/.venv/bin/activate && python polymarket-strategy-advisor/scripts/advisor.py --portfolio-db ~/.polymarket-paper/portfolio.db --top 5
Output: JSON array of trade recommendations sorted by expected value.
Backtest Engine (scripts/backtest.py)
Comprehensive performance analysis and live-readiness assessment:
bashsource /home/verticalclaw/.venv/bin/activate && python polymarket-strategy-advisor/scripts/backtest.py
Live-readiness check only:
bashsource /home/verticalclaw/.venv/bin/activate && python polymarket-strategy-advisor/scripts/backtest.py --live-check
Output: total return, win rate, Sharpe ratio, max drawdown, profit factor, per-strategy breakdown, and READY/NOT READY assessment against CLAUDE.md prerequisites (20+ trades, >55% win rate, Sharpe >0.5, drawdown <15%).
Daily Performance Review (scripts/daily_review.py)
Analyzes paper trading history and suggests improvements:
bashsource /home/verticalclaw/.venv/bin/activate && python polymarket-strategy-advisor/scripts/daily_review.py --portfolio-db ~/.polymarket-paper/portfolio.db
Review past N days:
bashsource /home/verticalclaw/.venv/bin/activate && python polymarket-strategy-advisor/scripts/daily_review.py --portfolio-db ~/.polymarket-paper/portfolio.db --days 7
Output: performance metrics, win/loss breakdown, strategy-level analysis, and actionable parameter adjustment suggestions.
Strategy References
references/viable-strategies.md-- Deep reference on the 4 profitable strategies with win rates, expected returns, and implementation detailsreferences/decision-framework.md-- Complete decision tree for entries, exits, position sizing, and risk limits
Disclaimers
- This skill provides analytical tools and educational frameworks only
- Not financial advice. Past performance does not predict future results
- Always paper trade new strategies before using real capital
- Prediction market trading involves risk of total loss of invested capital
