Which is more important, knowing what direction to trade or knowing when to enter a trade? In his February 2026 paper entitled "Who Profits from Prediction Markets? Execution, not Information", Joshua Della Vedova decomposes prediction market trade returns into:
- Directional component - whether the trader predicted the winning outcome.
- Execution component - entry price relative to final value.
Prediction markets enable skill measurements of both based on binary outcomes and no benchmarks. He considers five types of traders based on wallet activity/size/volume:
- Bot (73,935): >50 trades per day or >1,000 total trades.
- Sophisticated (64,913): >$10,000 volume, diversified across markets and >30 days of active trading.
- Active Retail (1,305,716): 10 to 1,000 trades.
- Casual (421,983): 2 to 9 trades.
- One-shot (114,861): exactly one trade.
Using data for 222 million completed trades on Polymarket during November 2022 through part of February 2026, he finds that:
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