Backtesting is standard practice in equities and futures and almost absent from prediction markets, even though prediction markets are unusually well suited to it. Every contract resolves to a known outcome at a known price, so there is no ambiguity about whether a position was right and no modelling required to value it at settlement. A contract either paid 1 or paid 0.
A live feed cannot tell you what wins
The common advice in prediction markets is to follow large traders. It is incomplete advice, because large traders do several different things and those things have very different economics.
A large position on a heavy favourite at 90 cents resolves correctly most of the time and returns about 11 cents on the dollar when it does. A large position on a longshot at 12 cents loses far more often than it wins and returns more than seven times the stake when it lands. One strategy can show a high win rate and lose money; the other can lose three quarters of its trades and finish well ahead. Watching either happen in a feed does not tell you which is which. Only scoring a large sample does.
How Rivo builds a backtest
A strategy is a named rule. The signal can constrain the venue, the market category, the sports league, the trade size, the entry price band, the position type (a new position, an increase to an existing one, or a reversal), and free text matched against the market title. Specific markets can also be followed directly.
Every recorded trade that satisfies the signal is claimed by the strategy, along with the side, entry price and size as they stood when the trade printed. Snapshotting rather than re-deriving matters: it means a strategy's history stays reproducible and cannot be quietly rewritten by a later correction upstream.
When the underlying market resolves, each claimed trade is scored a win or a loss against the real outcome, and profit and loss is computed the way the contract actually settles. Trades in markets that are still open are priced against current odds and reported separately as unrealised, never blended into the settled figure.
Position sizing changes the answer
A backtest that sizes each position the way the original trader sized it is mostly a report on whichever single trade was largest. One eight-figure position will dominate several hundred ordinary ones, and two strategies sized that way cannot be meaningfully compared.
Rivo defaults to a flat stake per trade, which weights every signal in the signal equally and makes the resulting return a property of the signal rather than of one outlier. The original trader's size is still shown alongside, both because it is information about conviction and because it bounds what could realistically have been filled. A hypothetical stake far above what the original trader achieved is flagged, since the order book would not have absorbed it.
What a backtest cannot tell you
Results are paper results. They assume a fill at the price the observed trade printed at, and they exclude fees, slippage and the market impact of your own order. Thin markets are where these assumptions break down hardest, and thin markets are also where the largest percentage moves occur, so a signal that looks exceptional on longshots deserves more scepticism than the same filter on liquid markets.
A backtest is also a statement about a sample, not a law. A signal scored over a few dozen resolved trades is close to meaningless; the same filter over several hundred is worth something. Each strategy reports how many of its trades have actually settled for exactly that reason.
None of this is investment advice, and past results do not predict future ones.
Related reading
- Polymarket whale tracker, the underlying trade detection on Polymarket.
- Kalshi whale tracker, the same coverage on the regulated US venue.
- Copy trading prediction markets, the execution side once a signal is proven.
- All-time wins and all-time losses, the resolved sample the backtests draw on.
Frequently asked questions
What does it mean to backtest a prediction market strategy?
It means defining a signal for which trades you would have taken, applying that filter to markets that have already resolved, and measuring what the signal returned. Because the outcomes are known, the result is a measurement rather than a forecast. On Rivo the signal is written over whale trade activity on Polymarket and Kalshi: trade size, entry price, market category, position type, and keywords in the market name.
Where does the historical data come from?
Rivo records large trades on Polymarket and Kalshi as they print, storing the side, entry price and size at that moment. When the underlying market resolves, each trade is scored a win or a loss against the actual outcome. A backtest runs a signal over that recorded history, which currently covers a rolling 90-day window.
How is the return calculated?
Positions are priced the way prediction market contracts settle: a winning contract pays out at 1 and a losing contract pays 0. A stake of $100 at an entry price of 20 cents returns $400 profit on a win and loses $100 on a loss. You choose the stake, either a flat amount per trade, the size the original trader used, or a per-trade amount you set yourself.
Why does the stake matter?
Because sizing by the original trader's position makes a backtest a readout of whichever single trade was largest. A flat stake per trade weights every signal equally, which is what makes two strategies comparable. Rivo defaults to a flat $100 for that reason.
Can a strategy keep running after the backtest?
Yes. A strategy can continue on paper as new qualifying trades arrive, mark open positions against current odds, and score them when markets resolve. Choose daily summaries or per-trade updates while the bot records matching activity. A signal with a paper record behind it can then be switched to supported live execution through your own connected account and the caps you set.
Are the results real money results?
No. They are paper results that assume a fill at the price the original trade printed at, with no fees or slippage. A large stake on a thin market would not have filled at that price in reality, which is why the size the original trader achieved is shown next to your hypothetical stake.