/probability-momentum

name: probability-momentum
description: Use when a Polymarket outcome price and filled volume are accelerating in the same direction.
metadata:
  version: 0.1.0
  updated: 2026-06-17

Strategy: Polymarket · Probability Momentum

When to use

Use this when someone asks for momentum, trend following, breakout, follow-the-crowd behavior, fast-moving crypto milestones, or rapid probability acceleration.

What the agent should look for

• Canonical Polymarket market from `GET /context/markets?venue=polymarket`.
• `backtest_ready: true`.
• Sufficient filled-trade history for the requested lookback window.
• Rising probability on last-trade filled ticks.
• Elevated fill counts or larger notional during the move.
• Market not too close to resolution unless user explicitly accepts expiry risk.

Backtest fit with filled data

Good fit for this archetype. Filled `TradeTick` history can validate whether momentum would have produced fill-driven entries, exits, and directional exposure.

Limit: filled-trade backtests do not prove maker queue position, maker rebates, or order-book depth. Treat this as taker-style behavior evidence, not certainty.

Strategy logic

Enter YES when recent probability rises more than a threshold over `lookback_ticks`. Exit when `exit_after_ticks` is reached, or when momentum stalls if an exit condition is included.

Nautilus strategy shape

• `subscribe_trade_ticks(instrument_id)` to stream TradeTicks.
• Use `on_trade_tick` as the main event handler.
• Submit market or conservative IOC orders.
• Track open position and fill state in `on_order_filled`.

Example strategyConfig

{
  "lookback_ticks": 5,
  "momentum_threshold": 0.02,
  "order_size": 10,
  "exit_after_ticks": 25,
  "max_entries": 3
}

Iteration knobs

| Knob | Effect | |---|---| | `lookback_ticks` | Larger values reduce noise; smaller values react faster. | | `momentum_threshold` | Higher values reduce frequency and require stronger momentum. | | `order_size` | Larger values increase PnL sensitivity and liquidity exposure. | | `exit_after_ticks` | Shorter values trim quickly; longer values hold trend. | | `max_entries` | Caps repeated entries in choppy markets. |

Failure modes

1. One large fill can produce a false momentum signal. 2. Thin trades can overstate available liquidity. 3. Late-resolution markets can reverse from mark-to-market gains to a 0/1 close. 4. Stale fills can make momentum look cleaner than it was live.

User-facing framing

"This is a probability momentum strategy: it buys when fills and last-trade probability move together in one direction. It is backtestable with filled TradeTicks, but it does not confirm maker queue priority or spread capture."