Polymarket Trading Bot

A high-performance algorithmic trading bot for Polymarket prediction markets, built with Rust and Tokio. Features real-time data integration, dynamic market discovery, multiple alpha strategies, and comprehensive risk management.

Features

Core Capabilities

• Real-Time Data Integration

  • Binance WebSocket for spot price feeds (BTCUSDT)
  • Polymarket CLOB WebSocket for L2 orderbook streaming
  • Gamma API for automatic market discovery and rotation

• Dynamic Market Rotation

  • Automatically selects markets nearest to expiry
  • No-trade zones to prevent late entries
  • Seamless transition between expiring and new markets

• Risk Management

  • Fractional Kelly criterion for position sizing
  • Circuit breakers (daily loss limit, max positions)
  • Take-profit and stop-loss automation
  • Minimum order size enforcement ($1)

• Alpha Strategies

  • Fair Value: Black-Scholes binary option pricing
  • Lead-Lag: Momentum arbitrage between spot and prediction markets
  • Flash Crash: Mean-reversion on sudden price drops
  • Book Imbalance: Order-flow based entry signals
  • Convergence: Near-expiry probability convergence
  • Market Maker: Liquidity provision strategy

• Execution

  • Paper mode for simulation with real market data
  • Live mode with Polymarket SDK integration
  • Automatic USDC balance fetching for live accounts
  • Rate-limited API calls

• Terminal UI (TUI)

  • Tokyo Night color theme
  • Real-time orderbook visualization
  • Position tracking with TP/SL display
  • Strategy performance metrics (trades, win rate, PnL)
  • Market info with expiry countdown
  • Auto-logging of position changes

Architecture

graph TD
    subgraph External
        BWS[Binance WebSocket]
        PWS[Polymarket WebSocket]
        GAM[Gamma API]
        CLOB[Polymarket CLOB API]
    end

    subgraph Actors
        FA[Feed Actor]
        MA[Market Actor]
        SA[Strategy Actor]
        RA[Risk Actor]
        EA[Executor Actor]
        TUI[TUI Dashboard]
    end

    BWS -->|Spot Price| FA
    PWS -->|Orderbook| MA
    GAM -->|Market Discovery| MA

    FA -->|FeedEvent| SA
    MA -->|MarketEvent| SA
    MA -->|MarketRotation| RA

    SA -->|Signal| RA
    RA -->|ExecutableOrder| EA
    EA -->|ExecutionEvent| RA
    EA -->|ExecutionEvent| SA

    RA -->|PositionSnapshot| SA
    SA -->|WorldState| TUI

    EA <-->|Orders/Fills| CLOB

    style FA fill:#7aa2f7
    style MA fill:#7dcfff
    style SA fill:#bb9af7
    style RA fill:#f7768e
    style EA fill:#9ece6a
    style TUI fill:#e0af68

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Data Flow

sequenceDiagram
    participant Market as Market Actor
    participant Feed as Feed Actor
    participant Strategy as Strategy Actor
    participant Risk as Risk Actor
    participant Executor as Executor Actor
    participant TUI as TUI

    Market->>Strategy: MarketEvent (orderbook update)
    Feed->>Strategy: FeedEvent (spot price)

    Strategy->>Strategy: Evaluate signals
    Strategy->>Risk: Signal::Enter

    Risk->>Risk: Check limits, size position
    Risk->>Executor: ExecutableOrder

    Executor->>Executor: Submit order
    Executor->>Risk: ExecutionEvent::OrderFilled

    Risk->>Risk: Update position, check TP/SL
    Risk->>Strategy: PositionSnapshot
    Strategy->>TUI: WorldState update

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Project Structure

graph LR
    subgraph Crates
        CORE[pmbot-core<br/>Types, Config, Messages]
        MARKET[pmbot-market<br/>Discovery, Orderbook, WS]
        FEED[pmbot-feed<br/>Binance, Volatility]
        STRAT[pmbot-strategy<br/>Signals, WorldState]
        RISK[pmbot-risk<br/>Kelly, Limits, Positions]
        EXEC[pmbot-executor<br/>Orders, Live/Paper]
        TUI[pmbot-tui<br/>Dashboard, Widgets]
    end

    CORE --> MARKET
    CORE --> FEED
    CORE --> STRAT
    CORE --> RISK
    CORE --> EXEC
    CORE --> TUI

    MARKET --> STRAT
    FEED --> STRAT
    STRAT --> RISK
    RISK --> EXEC
    STRAT --> TUI

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Crate	Responsibility
pmbot-core	Shared types, messages, config, math utilities
pmbot-market	Market discovery, orderbook tracking, WebSocket
pmbot-feed	Binance price feeds, volatility computation
pmbot-strategy	Signal generation, world state management
pmbot-risk	Kelly sizing, circuit breakers, position tracking
pmbot-executor	Order lifecycle, Live/Paper execution
pmbot-tui	Real-time terminal dashboard

Installation

Prerequisites

• Rust 1.88+
• Polymarket account with USDC on Polygon

Setup

1. Clone the repository:

git clone https://github.com/yourusername/polymarket-bot-rs.git
cd polymarket-bot-rs

2. Create .env file:

cp .env.example .env

3. Add your credentials to .env:

PMBOT_PRIVATE_KEY=your_private_key_here
POLY_SAFE_ADDRESS=0xYourSafeAddress  # Optional for Gnosis Safe wallets

4. Configure config/default.toml:

[general]
mode = "paper"  # or "live"
strategies = ["fair_value", "lead_lag"]

[risk]
bankroll = 1000.0              # Configurable; live mode fetches actual balance
kelly_fraction = 0.15
max_position_pct = 0.05
max_positions = 5
daily_loss_limit_pct = 0.05
min_edge = 0.01                # Minimum 1% edge to trade

Running

# Paper mode (simulation with real market data)
cargo run --release run --config config/default.toml --paper --tui

# Live mode (real money)
cargo run --release run --config config/default.toml --live --tui

Configuration Reference

General Settings

Setting	Type	Description
mode	string	"paper" or "live"
log_level	string	Log verbosity: trace, debug, info, warn, error
strategies	array	List of active strategies

Risk Settings

Setting	Type	Default	Description
bankroll	float	1000.0	Starting capital (paper) or fetched from account (live)
kelly_fraction	float	0.15	Fraction of Kelly to use for sizing
max_position_pct	float	0.05	Max position as % of bankroll
max_positions	int	5	Maximum concurrent positions
daily_loss_limit_pct	float	0.05	Stop trading if daily loss exceeds this
stop_loss_pct	float	0.30	Stop-loss threshold
take_profit_multiplier	float	2.0	TP = entry + (edge × multiplier)
min_edge	float	0.01	Minimum edge to generate signal

Strategy Settings

Each strategy has its own section:

[strategy.fair_value]
enabled = true
vol_multiplier = 1.0
min_time_to_expiry_secs = 120
min_activation_edge = 0.01

[strategy.lead_lag]
enabled = true
lag_threshold = 0.005
entry_delay_ms = 500
exit_convergence_pct = 0.002

Strategies

Fair Value

Computes theoretical binary option prices using Black-Scholes:

• Uses BTC realized volatility from Binance
• Calculates probability of BTC > strike at expiry
• Enters when market price deviates from fair value by > min_activation_edge

Lead-Lag

Momentum strategy based on BTC spot price movement:

• Monitors BTC price changes over configurable window
• Enters when BTC moves > lag_threshold
• Direction matches expected market reaction

Flash Crash

Mean-reversion on sudden price drops:

• Monitors for rapid price declines > drop_threshold
• Enters long when price stabilizes
• Exits on recovery to reversion_target

Book Imbalance

High-frequency signal based on orderbook liquidity:

• Calculates imbalance ratio from bid/ask sizes
• Enters when imbalance > threshold with momentum confirmation
• Exits on imbalance reversal

Risk Management

Position Sizing

Uses fractional Kelly criterion:

position_size = f_star * kelly_fraction * bankroll
position_size = min(position_size, max_position_pct * bankroll)
position_size = max(position_size, $1)  // Minimum order

Take Profit / Stop Loss

• TP calculated from entry price and edge
• SL set to stop_loss_pct below entry
• Automatically monitored and triggered by Risk Actor

Circuit Breaker

• Halts trading if daily loss > daily_loss_limit_pct
• Respects kill_switch_path file for manual stop
• Enforces max_positions limit

Live Mode

When running in live mode:

1. Bot authenticates with Polymarket using your private key
2. Fetches actual USDC balance from your account
3. Places real orders on Polymarket CLOB
4. All risk limits apply

flowchart LR
    A[Start Live Mode] --> B[Load Private Key]
    B --> C[Authenticate with CLOB]
    C --> D[Fetch USDC Balance]
    D --> E[Update Bankroll]
    E --> F[Start Trading Loop]
    F --> G{Signal?}
    G -->|Entry Signal| H[Check Risk Limits]
    H --> I[Submit Order]
    I --> J[Monitor TP/SL]
    G -->|No Signal| F

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Development

Building

cargo build --release

Testing

cargo test --workspace

Code Structure

polymarket-bot-rs/
├── src/
│   └── main.rs              # Entry point, actor orchestration
├── crates/
│   ├── pmbot-core/          # Shared types and config
│   ├── pmbot-market/        # Market discovery and orderbook
│   ├── pmbot-feed/          # External price feeds
│   ├── pmbot-strategy/      # Trading strategies
│   ├── pmbot-risk/          # Risk management
│   ├── pmbot-executor/      # Order execution
│   └── pmbot-tui/           # Terminal UI
├── config/
│   └── default.toml        # Default configuration
└── .env                    # Credentials (gitignored)

License

MIT License - See LICENSE for details.

Disclaimer

This software is provided for educational and research purposes only. Trading in prediction markets involves significant risk of capital loss. The authors are not responsible for any financial losses incurred through the use of this bot. Always test thoroughly in paper mode before deploying live capital.