How to Accurately Identify 'Smart Money' in Prediction Markets?

Author: blocmates

Translation: Shan Ouba, Golden Finance

Prediction markets and the battlefield of Meme coins are entirely different arenas, but the same kind of hunter can navigate both.

Hunters do not fire bullets or shoot arrows aimlessly. I am referring to the Nordic hunters of the 14th century: they plan, monitor, observe, use the right tools, and only then do they complete their hunt.

Prediction markets and Meme coin markets are much the same.

There are some commonalities between the two:

• First, they share a common element: traders. Excellent traders are always looking for an edge, and the market's task is simple: to make that edge difficult to discover.

• Second, prediction markets are Meme coins with attached probabilities. The Meme coin market is built on narrative, attention, and speculation. The way prediction markets operate is similar, except users are betting on whether a certain event will occur.

Will Bitcoin rise to $150,000? Will the Federal Reserve cut interest rates? Will Chelsea win the Premier League title?

A contract priced at $0.55 means the market believes there is a 55% chance of that outcome occurring. Much like Meme coins, these prices fluctuate with news, attention, whale movements, and retail panic. The markets differ, but the psychology is similar.

• Third, information overload is a common ailment for poor traders in both markets. Narratives, markets, and opportunities are always emerging, making it easy for people to mistake frequent actions for progress.

The best traders have their own systems. These systems help them filter out noise, detect unusual activity early, and maintain patience.

Today, we will use tools provided by PolymarketScan (@PolyWhaleAlerts) to explain how to trade prediction markets like Meme coins.

How to Use PolymarketScan to Trade Prediction Markets

Filter Out Noise and Lock In on the Market

The first step to trading prediction markets like Meme coins is to filter out noise.

Meme coin traders use FOMO or Axiom to scan thousands of tokens. Prediction market traders also need a method to narrow down their focus.

PolymarketScan allows traders to explore and filter markets through various data indicators, such as:

• Trading volume

• Liquidity

• Smart money

• Probability changes

• Deadline

• Time until settlement

• Recent activity

Using these filters, users can answer questions like:

Which markets are showing meaningful activity, have sufficient liquidity, and are worth further investigation right now?

You can easily filter out markets that exhibit the following conditions:

• Sudden probability changes

• Abnormal trading volume

• Approaching settlement dates

You can also narrow down by event type of interest, either through manual searches or AI mode by category.

Build Conviction

Once you lock in on a market, the next step is to understand price movements.

Price changes indicate a shift in the market's judgment of the probability or direction of an outcome. Therefore, an increase in market price suggests that traders are factoring in another outcome's probability.

To investigate this change, you can track two things:

• Whale activity: You can determine whether price changes are supported by large trading activities and whether large positions are entering or exiting. You can also understand if market depth is insufficient, making prices more susceptible to single trades or whale impacts, and gain new insights into the reasons for changes.

Whale trades can serve as a starting point for research, but trading volume alone cannot prove that the trader possesses superior information.

• Trader profiles: Instead of just tracking whale activity, it’s better to further identify and investigate traders. For example, FOMO has established a system around similar patterns for Meme coins, driving the development of social trading. Similarly, studying trader profiles can help you view wallet histories, market participation, and available performance data.

If you find that a wallet has established a large position, you should investigate its history and try to answer the following questions:

• What markets does it trade?

• Has it participated in similar events before?

• How has it performed on settled positions?

• Is this position part of a broader strategy?

Track Smart Money

Anyone who has traded in the Meme coin battlefield understands the importance of tracking smart money.

Tracking smart money refers to traders monitoring early entries, repeated activities, and fund flows of wallets.

Prediction markets also have a similar research perspective. PolymarketScan's Whale Radar and leaderboards can help you discover wallets and traders worth investigating.

But to truly narrow down your focus, you need to organize your observation list and set alerts.

You can select them personally. If you’re lazy like me, you can also use already public curated observation lists.

Currently, there are over 290 public observation lists available, but we still recommend organizing lists for specific market categories yourself.

Creating your own observation list is simple:

• Find an active wallet or trader.

• Open their profile and investigate their history.

• Check the markets they participated in.

• Compare their activities with your own market research.

• Determine whether this information provides meaningful increments to your analysis.

• Add it to your list.

Don’t Ignore Settled Markets

Excellent traders do not only learn from open markets but also look at historical data from closed markets.

If you’ve heard Meme coin traders analyze, you’ll know a common saying: a coin previously reached a market cap of x million dollars, so its ceiling should be z.

It’s easier to derive patterns from historical data of past similar scenarios. For prediction markets, if the platform retains relevant records, past markets can help you review price movements, trading activities, and trader performances.

You can focus on the following patterns:

• How probabilities change as events approach.

• The timing of significant price changes.

• Trading volume before settlement.

• Wallet behavior across different market categories.

• Differences between early market pricing and final outcomes.

PolymarketScan's research features are designed for studying such patterns.

You can search keywords directly or search market phrase data from settled markets to understand market dynamics and learn from them.

If you don’t want to do it manually, you can let AI assist.

The PolymarketScan team states: "We’ve built an AI that can read Polymarket data so you don’t have to handle it yourself. Ask any question in natural language, and it will respond based on real-time data and show the source of each number. You can ask 30 questions for free without registration. PolymarketScan is an independent analysis platform powered by Polymarket. When users trade through its links, the platform receives referral fees from Polymarket's developer program. Market data comes from Polymarket. Content does not constitute investment advice, trading involves risks, and you may lose all funds; only for users aged 18 and above."

Conclusion

Prediction markets may seem different from Meme coins, but the mindset required to trade both has some similarities.

You need to filter out noise, identify meaningful activities, understand narratives, and form reasons and investment logic for building positions before taking action.

Tools like PolymarketScan can make the research process more organized, but they cannot eliminate the uncertainties involved.

At the same time, you must execute trades personally. You can deploy funds automatically or continue to operate manually in the traditional way.

Always remember, strategy trumps aimless net casting.

Of course, it’s unrealistic to have a strategy for all markets. The goal should be to establish a repeatable process that achieves a success rate you can accept. It’s that simple.

This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.