Author: Changan I Biteye Content Team

Opening the Polymarket leaderboard, the first reaction might be: this address made $200,000, is it safe to follow their bets? Not necessarily.

Behind the huge profits, it could be a series of correct bets on 50 markets, or it could be that a single large bet happened to be right. The former is a replicable systematic profit, while the latter is an unsustainable survivor bias.

This article will address two core questions:

1. How to penetrate data noise and identify the real "smart money"?

2. After finding an address, how to implement different strategies?

I. Finding Smart Money: The Essence of Predictive Markets is Information Game

Predictive markets are fundamentally different from trading cryptocurrencies in the secondary market: it is an extremely segmented information game.

Behind each market target is a concrete professional question:

• Will a certain movie's box office exceed 100 million in its opening week? (theater scheduling, pre-sale data)

• Will the highest temperature in a certain city tomorrow exceed 35 degrees? (meteorological models, historical averages)

• Will Iran launch an attack on Israel within this month? (geopolitics, intelligence monitoring)

There are extremely high information barriers in these fields. Following smart money essentially means looking for individuals who have a higher understanding in a specific vertical than you do.

So where to find these people?

In a previous article on Biteye “Mastering Polymarket, These 7 Tools Are Enough”, seven Polymarket tools were introduced. Taking Polymarket Analytics as an example, we must be cautious of the following three pitfalls when filtering:

1. The false prosperity of PNL (profit and loss) data. The data structure of Polymarket is extremely complex, involving various on-chain operations such as buying, splitting, merging, and redeeming. Many tools (even the official website) can yield PNL that is several times off if the calculation dimensions are chosen incorrectly. True smart money should be based on event dimensions, integrating inflows, outflows, and current position market value for accurate calculations.

2. Interference from arbitrage bots. For example, the automatedAltradingbot frequently appears on the leaderboard. These addresses profit through cross-market arbitrage or providing liquidity, and while their win rates are astonishing, each of their trades has hedged positions. If you only follow one "leg" of their trades, the risk will be completely asymmetric.

3. High win rates do not equal high expectations. Some addresses specifically target markets with win rates above 98% that are about to settle, taking the last $0.02 of profit. While this strategy has a win rate close to 100%, it offers no profit margin for followers and may even lead to losses due to transaction fees.

II. Four Dimensions for Filtering Smart Money

After finding the leaderboard, the next step is filtering. Smart money has two baseline conditions:

• Profits must align with the logic of the Kelly formula.

• There should not be excessive single losses.

The core idea of the Kelly formula is: the size of the bet should match the win rate and odds; you cannot go all in just because you feel confident about one bet. A trader who truly understands risk control calculates each position, ensuring that a single loss does not wipe out all previous profits.

Therefore, before looking at specific data, first exclude two types of addresses: those with abnormally large total losses and those with records of significant single losses. Even if the total PNL is positive, the risk control logic of such addresses is problematic.

For the remaining addresses, use the following four dimensions to judge:

1. Win Rate

The win rate is the core indicator for determining whether an address is consistently profitable, but it should be viewed in conjunction with PNL.

• High win rate but low PNL: often indicates end-of-day operations where wins yield little profit;

• Low win rate but high PNL: may indicate that a few large bets happened to be correct.

1. Number of Markets

A small sample size renders the win rate meaningless. The probability of winning 5 times in a row by flipping a coin is not low, but no one would consider that significant.

A win rate of 80% over 10 markets is far less credible than a win rate of 70% over 300 markets. The more markets involved, the harder it is to attribute profits to luck.

However, if the number of markets participated in is too high, it may indicate that the address belongs to a strategy bot, making following unnecessary.

3. Holding Period

Addresses with short holding times, entering and exiting within hours, may have their trades reflected in the price by the time you notice their buy. Following them would just mean chasing the price, potentially becoming exit liquidity.

Addresses with longer holding times are more likely to have anticipated a judgment. When you notice them, there is often enough time to follow, making them the most favorable type for ordinary followers.

4. Profit Structure: Is it diversified profit or reliant on a single bet?

A good total PNL does not mean every market is profitable. Some addresses rely on one or two large bets to prop up their profits, while most others are in the red. This structure is hard to replicate—you don’t know where the next large bet will go, nor whether it’s based on judgment or luck.

Stable smart money should have profits spread across multiple markets, rather than concentrated in a few unusually large trades.

What Does a Healthy Address Look Like?

Taking BeefSlayer from the weather leaderboard as an example. The data at a glance shows: participated in 1,360 independent markets, with 2,500 trades, net profit of $41,367, win rate of 61.2%, and an average bet of $196. The scatter plot on the right shows that profit points are distributed across various win rate ranges, not concentrated in a few unusually large trades. Large positions are concentrated in the 60%-90% win rate range, aligning with the logic of the Kelly formula, betting heavier on more certain markets and controlling positions in uncertain ones.

Capital Management: An average bet of only $196, with no instance of a single large bet that could wipe out the account in 2,500 trades, indicating stable risk control.

III. Practical Implementation: Automated Tools vs. Subjective Judgment

After finding an address worth following, how to operate? There are generally two paths: one is to use a bot for automatic following, which is convenient but has limitations; the other is to treat the positions of smart money as reference signals, making your own judgments before deciding whether to follow. Both methods have applicable scenarios, which will be discussed separately below.

Strategy One: Follow Bots

There are already ready-made follow bot tools available on the market, which can automatically follow once the target address is set. Common ones include:

Polygun @Polygun_: A Telegram follow bot that recently acquired Polymarket Analytics. The latter is a data analysis platform, and the merger allows for both analysis and direct execution of trades.

Kreo @kreoapp: A Telegram bot that monitors on-chain smart money movements in real-time and automatically executes trades, supporting daily loss limits and stop-loss rules, covering both Polymarket and Kalshi platforms.

PolyHub (Hubble) @MeetPolyHub: A tool under Hubble that helps users identify smart money addresses on Polymarket, and has launched a follow trading tool.

However, following bots are not as simple as imagined. After trying to follow, I encountered three issues:

Issue One: Mismatched Capital Size.

Assuming the address you are tracking has $100,000 in funds and places a $500 bet on a market, that is 0.5% of their total funds. If your following wallet only has $100, and you follow proportionally, that would mean spending $0.50, but the minimum transaction amount on Polymarket is $1, so following may not execute.

Issue Two: Market Liquidity Constraints.

Smart money has large capital, and one of their buys may have already consumed a significant portion of the order book's liquidity. By the time the follow triggers, the remaining order book may not be sufficient, and you either cannot buy at the same price or cannot buy enough volume.

Issue Three: Order Execution Mechanism

Most Polymarket traders rarely use market orders; the vast majority place limit orders at their ideal price, and small orders can easily execute consecutively.

This makes it difficult to choose a following method:

If you choose to follow based on portfolio proportion, small limit order executions can easily prevent your order from reaching the minimum transaction amount of $1;

If you choose to execute a fixed amount for each trade, it can easily lead to multiple consecutive executions on the same option, causing significant position shifts, and if the trader chooses to hedge later, there may not be enough funds to buy the hedged position.

These two issues are not apparent when the capital size is small, but they become increasingly severe as the following capital increases.

Strategy Two: Subjective Following

Treat the positions of smart money as signals, making your own judgments before deciding whether to follow.

Step One: Monitor Target Address

After finding an address worth following, you cannot rely on manual refreshing to discover their new actions. The practical approach is to use tools to monitor their on-chain transactions, receiving notifications immediately when they have new buys or sells.

You can use Kreo's Tg monitoring bot, which notifies you immediately when the monitored wallet address makes a transaction.

Step Two: Determine Why the Wallet Bought

After receiving the transaction record push, we need to determine why that address made a purchase.

Look at their entry timing: was it right after a significant news release? If it was news-driven trading, by the time you receive the notification and follow up, the market price may have already absorbed that news, and you would be chasing the price.

If they were positioned in advance, with the entry time earlier than the news, it indicates they are trading based on their own judgment, making this signal more valuable, and you still have time to follow.

If their entry price is close to 100, it indicates that the address is engaging in "end-of-day trading," where the market outcome is basically determined, and they are taking the last segment of profit. Whether to follow this position depends on whether the remaining space is worth it for you.

Step Three: Determine Whether It’s Worth Following

After judging the wallet's strategy, you need to check two more things before following:

• Price Difference: The larger the price difference, the higher your entry cost compared to theirs, compressing potential profits and amplifying risks.

• Position Proportion: The higher the proportion of this position relative to their total funds, the more confidence they have, making the signal more worthy of attention.

IV. Pitfall Guide: Why Following Still Leads to Losses?

Following sounds simple, but there are many details in practice that can lead to losses. Here are three misconceptions I have encountered.

Misconception One: The Position Mode of the Follow Bot is Not Set Correctly

Follow bots generally have four position modes: fixed amount, precise replication, by proportion, and by portfolio weight.

Initially, I used proportional following, but if the other party's funds are 100 times mine, and they bet 1%, I would be following with only a few cents, which cannot be executed. Smart money betting on low-probability markets relies on small positions for large odds, and this part of the profit cannot keep up.

So I switched to fixed amount following, buying $1 each time. But then I encountered another problem: low-probability markets are inherently high-risk for losses, and if smart money bets 100 times to win once to break even, following them a few times daily would quickly deplete funds without waiting for that one big win.

The conclusion is: before using a follow bot, clarify the other party's profit structure. If their earnings mainly come from low-probability markets, following with a bot is unlikely to replicate their strategy.

Misconception Two: Discovering Too Late and Still Following

It’s impossible to keep staring at the screen, and when you see the monitoring push and check the market, you often find the price has risen from $0.35 to $0.72.

Following at this point means your cost is double theirs, with remaining profit space down to less than $0.28, but if you misjudge, the downside could still be $0.72, making the risk-reward completely asymmetric.

Misconception Three: Holding While Smart Money Has Cleared Their Positions

When monitoring smart money starts to reduce positions, you might think, "The direction is still right, just wait a bit longer," only to find they have completely cleared while you are still fully invested.

The underlying logic of following is to leverage their information and judgment. When they exit at a loss, if you still hold on hoping for a rebound—that's also one of the main reasons I have lost the most in following trades.

This is similar to being a liquidity provider on Polymarket: if a limit order accidentally executes, and the spread is large, you often hesitate to cut losses, thinking the price will bounce back, only to see it drop continuously.

These three misconceptions share a common issue: following can easily lead to abandoning critical thinking.

The bot executes for you, and smart money judges for you, making it seem like you don’t have to manage anything, but once a problem arises, you have no idea where it went wrong or how to adjust.

V. In Conclusion: Following is Entry-Level, Understanding is Upgrading

Following is a crutch; it can help you enter the deep waters of predictive markets, but it cannot replace your walking.

What truly matters is not what smart money "bought," but "why they bought." When you start to deduce the logic behind their actions, following will no longer be your lifeline but a tool for enhancing efficiency.

This is the essential path from being a "retail trader" to becoming "smart money."