## What is algo trading and why it matters
Algo trading means letting code make decisions instead of gut feeling. Instead of "I think this contract will go up" you write a rule: "if the price has been rising for 14 days - buy." The computer checks this rule across thousands of contracts in seconds and doesn't get emotional.
Three key advantages:
Speed - a script scans hundreds of contracts per second. Doing it manually takes hours.
Discipline - code doesn't panic, doesn't get greedy, doesn't "wait a bit longer." Signal fires - we act.
Repeatability - you can test a strategy on historical data (backtest) before risking real money.
The process: collect data -> form a hypothesis -> test on history -> deploy. This article walks through every step.
Tools: Python and four libraries. The same ones quants at hedge funds use - just applied to a different domain.
## Prediction markets
A prediction market is a platform where people buy and sell contracts on event outcomes. A contract is a yes/no question.
Example: "Will Bitcoin be above $100K by end of 2026?"
• Contract trades between $0 and $1
• Event happens - pays $1. Doesn't happen - $0
• Current price = the crowd's implied probability.
Contract at $0.77 -> the market thinks there's a 77% chance.
Buy at $0.42, event happens - you get $1, profit $0.58. Doesn't happen - you lose $0.42.
Platforms: Polymarket.
Left - how the "BTC > $100K" contract price moved over 90 days. Right - 5 contracts at once.
Why does algo trading work here? Prediction markets are young. Fewer participants, more inefficiencies. If you can estimate probabilities better than the crowd and automate it - you have an edge.
Why does algo trading work here? Prediction markets are young. Fewer participants, more inefficiencies. If you can estimate probabilities better than the crowd and automate it - you have an edge.
## Setup
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