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I had a thesis two months ago that you could detect predictors with insider knowledge and ride their coat tails and spent some amount of time staring at the dat

by hx8 6mo ago

I had a thesis two months ago that you could detect predictors with insider knowledge and ride their coat tails and spent some amount of time staring at the data and running some ML algos to detect them. I learned some things about the market during this time, but did not succeed in my detection algorithm. * Polymarket is a bit more transparent with who placed what bet, so it's a good place to go to study winners. * The most consistent Polymarket winner I saw was placing 95%+ odds many, many times a day. * Most markets will have a surprisingly small liquidity, so if your edge is just 5% you won't make as much as a 5% edge in the stock market could make you. This is good in that it keeps the biggest fish out, but some big players seem to be using strategies based on holding the most chips. * Paper trading in Polymarket/Kalshi is very different than paper trading in the stock market, because even a few grand in Polymarket/Kalshi can have a big impact in how other "traders" interact with you. The traditional paper trade validation -> unleash the bot strategy doesn't work. You need to real trade with real money and scale up while watching how the market responds. EDIT: Bonus learning -- yes the market runs by getting fish into the system. That's why Kalshi is advertising so much, it attracts suckers for the professional to win from, all while Kalshi takes a percentage.

PaulHoule 6mo ago
I used to play penny stocks for fun and it was a blast to be doing $3000 trades and be responsible for 30% of the volume for the day. You can learn a lot about how markets work if you adopt a penny stock, particularly the kind that trades in a wide range where you can buy in at 0.03 and figure "I'll sell when it hits 0.12" and sooner or later it does... then falls back down to 0.02.
- roflyear 6mo ago
  You can "trade the news" with penny stocks (this is basically just buying when people first start talking about it then selling when more people are talking about it), but like you say, the liquidity is soooooo low that you have to be really careful if you plan to sell more than a few hundred dollars. Generally, you're going to lose money - so don't do it.
  - PaulHoule 6mo ago
    Like any kind of gambling you have to do it with money you can't afford to lose and if you want exposure to stocks it is hard to say that you shouldn't have a big chunk of your savings in something like $QQQ or $VOO. Myself I was working on finance-adjacent stuff at the time and thought it had educational value. I did OK trading my favorite penny stock but I've had my share of financial misadventures, like I just had to buy $XIV because I wanted to see what happened and... I did.
- aworks 6mo ago
  This is interesting to me. I never had any enjoyment from traditional gambling when I dabbled in it. But I like the idea of being an expert on a little-known company and experiencng the response of my actions. Of course, it would be "for entertainment purposes only." I was never interested in market timing, though.
skinfaxi 6mo ago
> I learned some things about the market during this time, but did not succeed in my detection algorithm. What failed? Was it too late to follow the trend by the time one was identified or something else? It seems much more transparent than trying to reason about say dark pool trades.
- hx8 6mo ago
  I am unfamiliar with working with such signal-to-noise ratios. * I only had the example trades in the news as 100% confirmed positive trades. * There are hundreds of millions of dollars in trades a day in Polymarket. * In Polymarket you can just spin up a new account. If an account spins up, makes a $50k bet and wins, and then has no other activity, was that an insider trader or just someone with a behavioral pattern of spinning up new accounts? Just following up on these types of trades didn't provide a very big edge, as the nature of the trade adjusts the payout percentage.
  - jldugger 6mo ago
    > In Polymarket you can just spin up a new account. If an account spins up, makes a $50k bet and wins You'd probably want to use some form of bayesian ranking, like say add 1k of total bets and 500 in total winnings to the raw scores. But your bigger problem is just that people spinning up new accounts may be doing it to avoid your tracking. The kind of person with lots of evidence that they're good should be smart enough to know about copycat traders. The evilest among them might use a small bet to lure copycats and then trade against them in alts.
    - pessimizer 6mo ago
      > The kind of person with lots of evidence that they're good But what evidence is there that anyone is "good"? The fact that I am an insider to one event does not make me an insider to all events. If I were an insider to many events, I would probably have better ways to profit off of them. Placing a big bet is something I would do if I knew one thing.
chillfox 6mo ago
I used to work for a sports betting company that identified individuals who were a little too good. The key is to remember that they are addicts and will bet on events regardless of if they have insider knowledge or not, so you have to account for this and not only identify the individuals with insider knowledge, but also what events they have that knowledge about and what they don't.
- doctorpangloss 6mo ago
  Do people here and the WSJ comprehend though that they are giving Polymarket free publicity to farm addicts?
  - AureliusMA 6mo ago
    This is like saying that "Supersize me" is free publicity for MacDonalds.
    - greedo 6mo ago
      No such thing as bad publicity? I would bet that McDonalds saw an uptick in sales after the release of SSM.
    - doctorpangloss 6mo ago
      every casino's business model is about get-in-the-door appeal in order to fish out a handful of very lucrative whales. polymarket included. so no they're not really comparable.
ModernMech 6mo ago
This is the trap of modern society. Think about what you're doing: instead of anything productive, you thought a good use of your time was sitting there staring at numbers, hoping to find a pattern to make money off of people; who in their own right are using insider information to game a system; which itself is set up to capitalize off the fact that the larger economy has failed, and now all that's left is to just make money off of guessing.
- rwmj 6mo ago
  True, but hx8 isn't to blame here and was simply trying an interesting experiment. Blame the system instead.
  - ModernMech 6mo ago
    I did blame the system, I said it's the trap of modern society. The only reason hx8 fell into this trap was because they thought it would be profitable, that's not a moral failing on the part of the poster.
- yieldcrv 6mo ago
  Finance has always been the largest sector on the planet through every economic environment you have been alive for, I don't really understand why there is a current of this community that acts so divorced from its perpetual and all encompassing existence their whole lives Despite you being an individual, you reflect an aberration of sentiment here that makes no sense For example, the larger economy hasn't failed, another view is that this is price discovery of a mispriced agent in the market. A wage worker whose actual productivity isn't valued accurately, and a market based solution has been developed that allows for closer accuracy. More profits to the insider and the copy trader, their available capital and liquidity is derived from their utility to the employment sector and their potential profits with that capital and liquidity is derived from the event's actual utility to the market. Additionally, the productivity of all agents isn't known, you don't know what they were doing with their time before and it likely was suboptimal already - as in doomscrolling on social media or vegetating on the couch. Finally, you have no way of quantifying if those lazy things were suboptimal uses of time, or if a completely active other activity was suboptimal or optimal, as this goes into relative utility and schools of ethics.
alexpotato 6mo ago
> I had a thesis two months ago that you could detect predictors with insider knowledge and ride their coat tails and spent some amount of time staring at the data and running some ML algos to detect them. Polymarket actually wrote an article about "copycat trading": https://news.polymarket.com/p/copycat https://news.polymarket.com/p/copycat
AureliusMA 6mo ago
The only winners are the market makers and the ones initiating insider trading. You'll always be on the wrong is of the liquidity when trying to ride alongside scammers.

by hx8 6mo ago

PaulHoule 6mo ago

I used to play penny stocks for fun and it was a blast to be doing $3000 trades and be responsible for 30% of the volume for the day. You can learn a lot about how markets work if you adopt a penny stock, particularly the kind that trades in a wide range where you can buy in at 0.03 and figure "I'll sell when it hits 0.12" and sooner or later it does... then falls back down to 0.02.

roflyear 6mo ago
You can "trade the news" with penny stocks (this is basically just buying when people first start talking about it then selling when more people are talking about it), but like you say, the liquidity is soooooo low that you have to be really careful if you plan to sell more than a few hundred dollars. Generally, you're going to lose money - so don't do it.
- PaulHoule 6mo ago
  Like any kind of gambling you have to do it with money you can't afford to lose and if you want exposure to stocks it is hard to say that you shouldn't have a big chunk of your savings in something like $QQQ or $VOO. Myself I was working on finance-adjacent stuff at the time and thought it had educational value. I did OK trading my favorite penny stock but I've had my share of financial misadventures, like I just had to buy $XIV because I wanted to see what happened and... I did.
aworks 6mo ago
This is interesting to me. I never had any enjoyment from traditional gambling when I dabbled in it. But I like the idea of being an expert on a little-known company and experiencng the response of my actions. Of course, it would be "for entertainment purposes only." I was never interested in market timing, though.

skinfaxi 6mo ago

> I learned some things about the market during this time, but did not succeed in my detection algorithm. What failed? Was it too late to follow the trend by the time one was identified or something else? It seems much more transparent than trying to reason about say dark pool trades.

hx8 6mo ago
I am unfamiliar with working with such signal-to-noise ratios. * I only had the example trades in the news as 100% confirmed positive trades. * There are hundreds of millions of dollars in trades a day in Polymarket. * In Polymarket you can just spin up a new account. If an account spins up, makes a $50k bet and wins, and then has no other activity, was that an insider trader or just someone with a behavioral pattern of spinning up new accounts? Just following up on these types of trades didn't provide a very big edge, as the nature of the trade adjusts the payout percentage.
- jldugger 6mo ago
  > In Polymarket you can just spin up a new account. If an account spins up, makes a $50k bet and wins You'd probably want to use some form of bayesian ranking, like say add 1k of total bets and 500 in total winnings to the raw scores. But your bigger problem is just that people spinning up new accounts may be doing it to avoid your tracking. The kind of person with lots of evidence that they're good should be smart enough to know about copycat traders. The evilest among them might use a small bet to lure copycats and then trade against them in alts.
  - pessimizer 6mo ago
    > The kind of person with lots of evidence that they're good But what evidence is there that anyone is "good"? The fact that I am an insider to one event does not make me an insider to all events. If I were an insider to many events, I would probably have better ways to profit off of them. Placing a big bet is something I would do if I knew one thing.

chillfox 6mo ago

I used to work for a sports betting company that identified individuals who were a little too good. The key is to remember that they are addicts and will bet on events regardless of if they have insider knowledge or not, so you have to account for this and not only identify the individuals with insider knowledge, but also what events they have that knowledge about and what they don't.

doctorpangloss 6mo ago
Do people here and the WSJ comprehend though that they are giving Polymarket free publicity to farm addicts?
- AureliusMA 6mo ago
  This is like saying that "Supersize me" is free publicity for MacDonalds.
  - greedo 6mo ago
    No such thing as bad publicity? I would bet that McDonalds saw an uptick in sales after the release of SSM.
  - doctorpangloss 6mo ago
    every casino's business model is about get-in-the-door appeal in order to fish out a handful of very lucrative whales. polymarket included. so no they're not really comparable.

ModernMech 6mo ago

This is the trap of modern society. Think about what you're doing: instead of anything productive, you thought a good use of your time was sitting there staring at numbers, hoping to find a pattern to make money off of people; who in their own right are using insider information to game a system; which itself is set up to capitalize off the fact that the larger economy has failed, and now all that's left is to just make money off of guessing.

rwmj 6mo ago
True, but hx8 isn't to blame here and was simply trying an interesting experiment. Blame the system instead.
- ModernMech 6mo ago
  I did blame the system, I said it's the trap of modern society. The only reason hx8 fell into this trap was because they thought it would be profitable, that's not a moral failing on the part of the poster.
yieldcrv 6mo ago
Finance has always been the largest sector on the planet through every economic environment you have been alive for, I don't really understand why there is a current of this community that acts so divorced from its perpetual and all encompassing existence their whole lives Despite you being an individual, you reflect an aberration of sentiment here that makes no sense For example, the larger economy hasn't failed, another view is that this is price discovery of a mispriced agent in the market. A wage worker whose actual productivity isn't valued accurately, and a market based solution has been developed that allows for closer accuracy. More profits to the insider and the copy trader, their available capital and liquidity is derived from their utility to the employment sector and their potential profits with that capital and liquidity is derived from the event's actual utility to the market. Additionally, the productivity of all agents isn't known, you don't know what they were doing with their time before and it likely was suboptimal already - as in doomscrolling on social media or vegetating on the couch. Finally, you have no way of quantifying if those lazy things were suboptimal uses of time, or if a completely active other activity was suboptimal or optimal, as this goes into relative utility and schools of ethics.

alexpotato 6mo ago

> I had a thesis two months ago that you could detect predictors with insider knowledge and ride their coat tails and spent some amount of time staring at the data and running some ML algos to detect them. Polymarket actually wrote an article about "copycat trading": https://news.polymarket.com/p/copycat https://news.polymarket.com/p/copycat

AureliusMA 6mo ago

The only winners are the market makers and the ones initiating insider trading. You'll always be on the wrong is of the liquidity when trying to ride alongside scammers.