Prediction Market Strategy

Binary prediction markets price contracts as probabilities. This skill covers the strategy, sizing, and validation layer that applies across all venues and market types. API mechanics live in kalshi-api / polymarket-api; contract semantics and settlement live in kalshi-weather-markets / kalshi-crypto-index-markets. This is the strategy/sizing/validation layer that applies across all of them.

Core Thesis

Price = implied probability. A contract priced at $0.18 claims an 18% chance of resolving YES. Brackets in a series sum to just above $1.00 — the overround is the house margin (roughly 5–8% for weather markets on Kalshi).

Takers systematically lose; makers systematically win. Across 300k+ Kalshi contracts, the average pre-fee return is ≈ −20%, concentrated in takers (market-order users) and in longshot buyers. Makers (resting limit orders) earn positive returns. On Polymarket (588M+ trades), the top ~1% of accounts capture ~76.5% of profit, predominantly by resting limit orders. This is the foundational result.

Favorite–longshot bias is the durable mechanism. Cheap longshots are systematically overpriced: a $0.05 contract historically wins ~2%; sub-$0.10 contracts lose ~60% of stake to buyers. Favorites are fairly- to slightly-underpriced. The repeatable expression is selling the overpriced longshot tail, maker-side — resting NO bids on brackets priced ~$0.05–$0.20, diversified across many events to survive the rare hit. This is structural/behavioral, not a forecasting edge.

Forecast skill ≠ trading edge. A good weather or event forecast is largely redundant with the market price at decision time. Markets aggregate information efficiently enough that even a measurably better model produces near-zero net edge after fees unless it finds systematic mispricings (which are behavioral, not informational). The exception is official-label ML in lightly-traded markets — but that is bounded by fill-rate and capacity, not forecast accuracy.

Strategy Catalog

Strategies evaluated on Kalshi/Polymarket weather and event markets. "Real" means it survived correct settlement + fees in testing; others are flagged so you don't re-chase them.