The prediction market is definitely the next track with the greatest wealth effect!

If RWA revolutionized the traditional securities market, then the prediction market will revolutionize the traditional gambling market.

Every transformation brings at least a tenfold increase in efficiency.

When combined with blockchain technology, global liquidity, no identity threshold, high transparency, and low transaction costs—any of these advantages represents a significant improvement over the traditional system.

The previous article introduced the current promising projects in the prediction market sector. This article will take you directly to practical application and introduce relevant strategies.

I've been playing frequently for two weeks and have figured out some basic strategies. I hope they can be of some help to you.

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

1. End-of-day arbitrage

End-of-day arbitrage means participating when you predict an event is about to end. The probability of a market reversal in the final stages of an event is very low. The trend is essentially confirmed, and the certainty is extremely high, but not yet 100%. For example, regarding predictions of BTC price increases and decreases, I used AI to backtest the past month's data: BTC's minute-by-minute volatility is approximately 0.05-0.15%. A 0.5% reverse movement in the final five minutes is required for a reversal, with a probability of only 21.3%. This makes buying at the end of the trading day a low-risk strategy, ideal for the average user.

Nowadays, late-day sweeping is also a common strategy used by whales and robots, and the accumulated profits are still quite considerable.

Specific steps:

1. Select the market: Find the BTC 15-minute up and down market or the 1-hour up and down market on PolyMarket

2. Monitoring time: Check the probability in the last 5 minutes. If the probability is greater than 97%, it basically means that the result is confirmed.

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

4. Risk Management: Setting a stop-loss is highly recommended! Set a sell order with a probability of falling to $0.90 to avoid a final extreme reversal and losing too much of your principal.

2. Cross-Market Arbitrage

Cross-market arbitrage refers to buying all mutually exclusive events for the same predicted event, either on the same platform or across different platforms, when the sum of the "Yes" and "No" predictions is less than 1. The predicted probability of the same event on different platforms varies, and you can use the price difference between different platforms to arbitrage. Especially on new platforms with insufficient liquidity, the sum of all results for the same event may temporarily be less than 1. Cross-market arbitrage requires real-time monitoring with monitoring robots and automated operations, which results in a relatively short window of opportunity.

Specific steps:

1. Scan the market: Use different platforms such as PolyMarket, Kalshi, Opinion, etc. to compare the same event and calculate the sum of Yes + No.

2. Identify opportunities: If the sum is less than 1, for example, PolyMarket Yes is 0.45, Kalshi No is 0.49, and the total is 0.94, buy immediately. 3. Buy: Use one wallet to buy 100 Yes shares @ 0.45 (45 USDC) on PolyMarket, and another to buy 100 No shares @ 0.49 (49 USDC) on Kalshi, for a total cost of 94 USDC. 4. Settlement: After the event is settled, since the shares of Yes and No are the same, and the shares are 100, the profit is 100 USDC, a profit of 6 USDC. 3. Providing Liquidity As a liquidity provider (LP), you place buy and sell orders in the order book to earn the spread and receive platform rewards. This strategy isn't pure arbitrage, but it can yield near-risk-free returns and is suitable for a neutral market. Similar to a maker strategy in the options market, LPs earn 2 cents per trade by placing orders (e.g., buy 0.49 / sell 0.51) and receive platform liquidity rewards. However, this strategy can also be risky, such as large price deviations, so frequent adjustments are required, making it suitable for users with more capital. Specific steps: 1. Select a market: Choose a highly liquid market, such as BTC 1-hour Up/Down. 2. Place an order: In the order book, place a limit buy order at 0.49 and a limit sell order at 0.51 (100 shares, cost ~50 USDC). 3. Earn Returns: Earn spread (2 USDC/100 shares) for trades completed; receive LP rewards (~0.1-0.5%/day) for untraded shares. 4. Manage Positions: Check daily and adjust orders to mid-price. Hold Yes/No positions to hedge against impermanent loss.

To sum up

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

Late-day sweep orders are simple and have a high winning rate (~80%), cross-market arbitrage has high profits but few opportunities, and providing stable liquidity requires capital management.

For

After you become advanced: Use robots to monitor cross-market arbitrage.

For those with ample funds: Provide liquidity, compound rewards, and arbitrage. I personally recommend that novice users use the end-of-day strategy for arbitrage. Not only can you get a small profit, but the key is to increase the trading volume at a high frequency and have the opportunity to get airdrops.