System Overview

PolyTools is a machine trader for prediction markets—not a charting or manual trading tool.

The platform exploits information latency and market inefficiencies through pure market arbitrage, event-driven trading, and systematic execution faster than human traders with strict risk discipline.

Unlike retail trading interfaces, PolyTools operates as a non-custodial execution desk. It bypasses the standard Polymarket UI to interact directly with the Central Limit Order Book (CLOB) via API, enabling millisecond-latency order placement and automated risk management.

System Architecture

PolyTools is built on a distributed, event-driven architecture with strict separation of concerns:

Design Principles

Arbitrage Strategies

Pure arbitrage strategies exploit pricing inefficiencies for guaranteed profit.

// Arbitrage Detection Logic (Simplified)
const totalCost = yesPrice + noPrice;  // e.g., 0.49 + 0.49 = 0.98
const guaranteedReturn = 1.00;          // One outcome always wins
const grossProfit = guaranteedReturn - totalCost;  // 0.02
const fees = guaranteedReturn * 0.02;   // Polymarket fee (~2%)
const netProfit = grossProfit - fees;   // Profit after fees

if (netProfit >= minProfitThreshold && totalCost < 1.00) {
    // Valid arbitrage opportunity
    executeArbitrageTrade(market);
}

Event-Driven Strategies

Event-driven strategies capitalize on information before markets reprice.

Passive Strategies

Passive strategies provide liquidity and capture spreads over time.

Execution Engine

The Execution Engine translates decisions into market actions with institutional-grade reliability.

Order Manager

• Creates orders with proper sizing based on risk limits
• Tracks order states: pending → submitted → filled/cancelled
• Handles partial fills intelligently
• Implements retry logic with exponential backoff

Trade Executor

• Signs and submits orders to Polymarket CLOB
• Monitors for fills via WebSocket
• Records execution quality (slippage, fill time)
• Handles API errors gracefully

Position Tracker

• Maintains current positions across all markets
• Calculates unrealized P&L in real-time
• Tracks position attribution by strategy
• Reconciles with on-chain state periodically

Order Types

Polymarket CLOB supports only limit orders. Execution behavior varies by time-in-force:

Execution Modes

Risk Philosophy

The core tenet: Survive first, profit second. Prediction markets are volatile and illiquid—risk management is not optional.

Default Global Limits

All limits are configurable per user and per strategy via the Dashboard → Risk Controls panel.

Pre-Trade Checks

Every order is validated by the Risk Controller before submission:

1. Position size within limits? — Trade value vs. max_position_size
2. Market exposure within limits? — Total exposure per market
3. Daily loss limit intact? — Current P&L vs. daily_loss threshold
4. Strategy-specific limits respected? — Per-strategy position caps
5. Sufficient collateral available? — Wallet balance check
6. Market not blacklisted? — Exclude known problematic markets

If any check fails, the order is rejected and an alert is generated. Warnings are issued when approaching limits (e.g., 70% of daily loss).

// Risk Controller Pre-Trade Check (Excerpt)
if (tradeValue > positionSizeLimit.limit_value) {
    result.approved = false;
    result.reason = `Position size ${tradeValue} exceeds limit ${positionSizeLimit.limit_value}`;
}

if (currentLoss >= dailyLossLimit.limit_value) {
    result.approved = false;
    result.reason = `Daily loss limit reached: $${currentLoss}`;
}

Kill Switch

Emergency stop mechanism to prevent catastrophic loss.

Triggers

• Daily loss limit breached
• Operator manual activation
• Connectivity issues detected
• Unusual market conditions

Token Gate

Access to live execution requires holding 1% of $POLYSCAN supply in your connected wallet.

Why Token Gating?

• Capacity Limit: Maximum 100 active users executing simultaneously.
• Strategy Protection: Arbitrage opportunities disappear when too many bots compete.
• Aligned Incentives: Token holders benefit from execution quality preservation.

Access Tiers

Getting Started

1. Connect Wallet: Click "Access Desk" and connect your Phantom wallet.
2. Verify Holding: Ensure you hold 1% of $POLYSCAN supply for live access.
3. Configure Risk: Set your daily loss limit, max position size, and exposure caps.
4. Enable Strategies: Activate desired strategies (Arbitrage, Event-Driven, Market Making).
5. Monitor Execution: The system automatically identifies and executes trades according to your defined parameters.