Prediction Markets

Prediction Markets is a skill for CLI Trader that provides a structured framework for trading on event outcomes across platforms like Polymarket and Kalshi. Unlike traditional financial markets where you trade on price movements, prediction markets require you to form independent probability estimates and compare them to market prices to identify edge. This skill gives your agent the forecasting methodology, platform mechanics knowledge, and bet sizing discipline needed to trade prediction markets analytically rather than on gut feeling.

The skill covers the full prediction market trading process. Probability estimation combines base rate analysis, Fermi decomposition, and reference class forecasting to form calibrated probability estimates for binary and multi-outcome events. Market efficiency assessment compares your estimate against the current market price, accounting for the bid-ask spread and liquidity conditions, to determine whether genuine edge exists or whether the market has already priced in the available information. Platform-specific knowledge covers Polymarket’s CLOB mechanics on Polygon including order types, liquidity dynamics, and settlement procedures, as well as Kalshi’s regulated event contract structure with its unique margin and settlement rules. The Kelly criterion adapted for binary outcomes provides mathematically optimal bet sizing, with fractional Kelly recommendations to account for estimation uncertainty. The skill also includes cognitive bias awareness, training the agent to flag common forecasting errors like anchoring, availability bias, and overconfidence that degrade probability estimates.

Within a CLI trading workflow, this skill acts as the analysis and sizing layer for prediction market positions. Describe an event you are considering, and the agent applies its forecasting framework to estimate a probability, compares it to the current market price, identifies whether edge exists, calculates appropriate position sizes, and flags any cognitive biases that might be affecting the assessment. It can also scan for cross-platform arbitrage opportunities where the same event is priced differently on Polymarket and Kalshi, offering low-risk convergence trades.

For the complete methodology — including formulas, decision trees, worked examples, and validation checklists — see the full Prediction Markets skill guide.