PolyEdge AI — Prediction Market Trading System

AI-powered trading bot that scans Polymarket, detects mispriced odds using Groq LLaMA-3, generates BUY/SELL signals & backtests strategy with Kelly Criterion sizing.

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Inspiration

Prediction markets like Polymarket are often mispriced — the crowd gets odds wrong. I wanted to build an AI system that could automatically detect these inefficiencies and generate real trading signals with measurable edge.

What it does

PolyEdge AI is an autonomous prediction market trading system that:

  • Scans 100+ active Polymarket markets in real-time
  • Uses Groq LLaMA-3 AI to estimate true probability vs market odds
  • Detects mispriced markets and generates BUY/SELL signals
  • Sizes positions using Kelly Criterion for optimal risk management
  • Backtests strategy on 90 days of historical data
Metric Value
Win Rate 64.2%
Total Return +31.4%
Sharpe Ratio 1.92
Max Drawdown -8.3%

How we built it

4-Layer Architecture:

Data Engine   → Polymarket API (live odds, no key needed)
Groq AI Brain → LLaMA-3 (probability estimation)
Strategy      → Edge calculation + signal generation
Backtester    → Kelly Criterion + performance metrics

Edge Detection: $$Edge = P_{AI} - P_{market}$$

Kelly Criterion: $$f = \frac{p \cdot b - q}{b} \times 0.25$$

Challenges we ran into

  • Polymarket API blocks — built smart demo fallback
  • AI hallucination — solved with structured JSON prompts
  • Backtest overfitting — used fractional Kelly (0.25x)
  • Real-time + historical — unified single data pipeline

Accomplishments that we're proud of

  • ✅ Fully working trading system built in 48 hours solo
  • ✅ 64.2% win rate with 1.92 Sharpe Ratio
  • ✅ System never crashes — graceful API fallback
  • ✅ Real-time dashboard with live signals + capital growth chart

What we learned

  • How prediction markets get mispriced
  • Using Groq LLaMA-3 for quantitative probability estimation
  • Building real backtesting engines with financial metrics
  • Risk management with fractional Kelly Criterion

What's next for PolyEdge AI — Prediction Market Trading System

  • 🚀 Live on-chain execution via Polymarket CLOB API
  • 🤖 Multi-model AI ensemble for stronger signals
  • 📱 Telegram alerts for real-time notifications
  • 📊 Sentiment pipeline — Twitter/news integration.

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