The prediction market is definitely the next track with significant wealth effects! If RWA revolutionizes the traditional securities market, then the prediction market revolutionizes the traditional gambling market.

Every time a transformation occurs, it is at least a tenfold increase in efficiency. Combined with blockchain technology, the global liquidity, no identity threshold, high transparency, and low transaction costs—any one of these advantages represents a significant improvement over traditional systems.

The previous article introduced the potential projects in the current prediction market track, and this one will directly take you through the practical aspects, introducing relevant strategies.

I have been playing frequently for two weeks and have figured out some basic strategies, hoping to provide some help to everyone.

In general, there are three main strategies: end-of-day order arbitrage, cross-market arbitrage, and providing liquidity.

1. End-of-Day Sweep Arbitrage

The end-of-day sweep order is to participate when a prediction event is about to end.

The probability of a reversal in the prediction market during the final stages of an event is very low, the trend has been basically confirmed, and the certainty is extremely high, but it has not yet reached 100%.

For example, regarding the prediction event of guessing the rise and fall of BTC prices, I used AI to backtest the data from the past month:

The BTC minute-level volatility is about 0.05-0.15%, and a reverse movement of 0.5% is needed in the last 5 minutes to flip, with a probability of only 21.3%.

This makes buying in the after-hours a low-risk strategy, very suitable for ordinary users.

Now, sweeping orders in the closing period is a common strategy for whales and robots, and the accumulated profits are quite considerable.

Specific operation steps:

1. Choose a market: Find the BTC 15-minute rise and fall market, 1-hour rise and fall market on PolyMarket.

2. Monitoring Time: Check the probability in the last 5 minutes. If the probability is greater than 97%, this basically indicates that the result is confirmed.

3. Execute Buy: If liquidity is good, buy directly with a market order; if liquidity is poor, you can buy with a limit order.

4. Risk Management: It is highly recommended to set a stop-loss! Set a sell order to sell when the price drops to $0.90 to avoid a final extreme reversal and losing too much principal.

2. Cross-Market Arbitrage

Cross-market arbitrage refers to finding that the sum of Yes and No is less than 1 for the same prediction event on the same platform or different platforms, and buying all mutually exclusive events.

The predicted probabilities of the same event are different on different platforms, and the price differences between platforms can be used for arbitrage.

Especially with some new platforms lacking liquidity, there may be a brief occurrence where the sum of all outcomes for the same event is less than 1.

If you want to engage in cross-market arbitrage, you need to use some monitoring bots for real-time monitoring, and also require automated operations, as the window period is relatively short.

Specific operation steps:

1. Scan the market: Compare the same event across different platforms such as PolyMarket, Kalshi, and Opinion, and calculate the total of Yes + No.

2. Identify Opportunities: If the total is <1, for example, PolyMarket Yes 0.45, Kalshi No 0.49, total 0.94, buy immediately.

3. Execute buy: Use one wallet to buy 100 Yes shares on PolyMarket at 0.45 (45 USDC), and another to buy 100 No on Kalshi at 0.49 (49 USDC), total cost 94 USDC.

4. Settlement: After the event settlement, since the shares for Yes and No are the same, and the total shares are 100, the profit is 100 USDC, with a profit of 6 USDC.

3. Provide Liquidity

As a liquidity provider (LP), place buy and sell orders on the order book to earn the spread and receive platform rewards.

This strategy is not pure arbitrage, but it can achieve approximately risk-free returns, suitable for neutral markets.

Similar to the options market maker strategy, LP earns 2 cents per transaction by placing orders (such as 0.49 buy / 0.51 sell) and can also receive liquidity rewards from the platform.

However, this strategy may also carry risks, such as significant price deviations, so frequent adjustments are required, making it suitable for users with a larger amount of capital.

Specific operation steps:

1. Choose a market: select a high liquidity market, such as BTC 1 hour Up/Down.

2. Limit Order: Set a limit buy order at @0.49 and a sell order at @0.51 (100 shares, cost ~50 USDC).

3. Earn Returns: Earn spread on trades (2 USDC/100 shares); Receive LP rewards on untraded (approximately 0.1-0.5% per day).

4. Manage Position: Check daily and adjust orders to mid-price. Hold Yes/No hedge against impermanent loss.

Summary

These three strategies are suitable for users with different risk preferences:

End-of-day sweeping orders are simple with a high win rate (~80%). Cross-market arbitrage has high profits but fewer opportunities, providing liquidity is stable but requires capital management.

For beginners: Test end-of-session sweeping orders with a small amount (10 USDC) to familiarize yourself with the order book.

After Advancement: Use robots to monitor cross-market arbitrage.

For those with ample funds: You can provide liquidity, compound rewards, and arbitrage.

I personally still recommend new users to use the tail-end strategy for arbitrage, which not only yields small profits but also allows for high-frequency trading volume, creating opportunities to receive airdrops.