Prediction Market Backtesting
Backtest prediction market strategies using historical order books, resolved outcomes, slippage modeling, and execution-aware replay.
Prediction market backtesting is different from backtesting traditional price charts. A prediction-market strategy must account for binary payoff, settlement timing, bid/ask spread, liquidity, and whether the market resolves as expected.
Required Data
- Resolved market outcomes for payoff and scoring.
- Historical snapshots for replaying what was known at the time.
- Order book depth for realistic entries, exits, and position sizing.
- Reference signals such as crypto spot or futures movement when relevant.
Backtesting Risks
| Risk | How to control it |
|---|---|
| Midpoint fills | Simulate against actual bid and ask depth. |
| Look-ahead bias | Replay snapshots in timestamp order only. |
| Resolution mismatch | Use settled market metadata and final outcomes. |
| Overfitting | Use walk-forward tests and out-of-sample windows. |