Prediction markets’ traditional copy trading tools enable users to copy the trades of successful bettors and traders; however, recently there has been an emerging strategy which takes an opposite path; rather than following winning trader’s strategies directly, users now can also copy losing traders directly – rather than following in their footsteps and copying only winning traders!
Sports bettors are familiar with “fading” bettors who experience losing streaks, which is also applicable in prediction markets. A company called Stand has developed an interactive tool which aggregates prediction market data and allows users to counter trade losing bettors by “fading their positions”, unlike typical bots or whale-watching tools which simply follow popular accounts’ trades without giving users much flexibility or control in doing so.
One challenge of traditional copy trading lies in its inadequacies for traders of size. To combat this, some of the larger and most successful traders know they’re being watched, using multiple wallets to hide their true positions – potentially leading to situations in which these traders take advantage of blind copy traders by moving funds between accounts in such ways as to cause losses on behalf of those blindly following them.
Why Fading Losing Traders May Be Effective
Stand is confident in its counter trading tool’s potential as data indicates that most prediction market traders, especially newer participants, tend to lose money over time. Some platforms even report that newcomers lose capital faster through traditional sports gambling than through prediction markets.
Stand cites studies which indicate a substantial proportion of users have negative returns, suggesting one viable strategy could be going against the grain and taking advantage of traders who consistently lose.
The tool’s utility can be seen through examples of traders who have lost considerable sums in certain markets and an ongoing decrease in profitable traders, reinforcing its potential use against persistent losers.
Flexibility of the Stand Tool
Though fading losing traders may not guarantee huge profits – as even losing bettors sometimes win big- it provides users with considerable flexibility and customization features to customize trade sizes by percentage, range or fixed amounts; set entry prices; slippage parameters; trade volumes, market resolution times, duration of copy trading strategies as well as exit strategies are available options to users of this tool.
Users with access to this level of control are able to tailor their counter trading strategies according to their personal preferences and risk threshold, potentially improving their chances of success in prediction markets.
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