Simple Functions
GLOSSARY/ANALYSIS

Edge Detection

Edge detection is the systematic process of scanning prediction markets to find contracts where the market price diverges from your thesis-implied fair value by more than the cost of execution.

CLI:sf edges

Systematic Edge Detection

Edge detection is what separates systematic trading from casual speculation. Instead of browsing markets and making gut-feel decisions, you define your view through a thesis, compute implied prices, and let the system find mismatches.

The Edge Detection Pipeline

  1. Thesis computation: Your causal tree produces thesis-implied prices for the root event
  2. Market mapping: The system identifies all contracts related to your thesis (across Kalshi and Polymarket)
  3. Price comparison: Current market prices are compared against thesis-implied prices
  4. Friction adjustment: Spread, fees, and estimated slippage are subtracted from theoretical edge
  5. Ranking: Opportunities are ranked by executable edge × liquidity score

Cross-Venue Edge Detection

One of the most powerful forms of edge detection is cross-venue — finding the same event priced differently on Kalshi vs. Polymarket. If Kalshi prices a recession at 28% and Polymarket at 35%, there's at least a 7-point arbitrage opportunity (minus cross-venue friction).

Edge Decay

Edges are perishable. The typical lifecycle:

  1. New information creates a mispricing (minutes)
  2. Active traders spot and start trading it (minutes to hours)
  3. Price converges toward fair value (hours to days)
  4. Edge disappears completely

The heartbeat's frequency determines how quickly you catch edges. Faster heartbeats catch shorter-lived opportunities.

Filters and Thresholds

Not every edge is worth trading. The sf edges command supports filters:

  • --min-edge 5: Only show edges above 5 points
  • --min-liquidity B: Only show markets with B-grade or better liquidity
  • --category economics: Only show economic contracts

Example

sf edges --min-edge 5 --min-liquidity B

Your thesis: "US Recession by 2026" (root: 42%)

  Market                    Mkt    Thesis  Edge   Liq  Venue
  KXRECSSNBER-26           28¢    42¢     +14pt   A   kalshi
  KXGDP-26Q2-TNEG          18¢    30¢     +12pt   B   kalshi
  recession-2026-poly       35¢    42¢     +7pt    A   polymarket
  KXUNRATE-26JUN-T5.0       35¢    42¢     +7pt    A   kalshi
  KXCPI-26MAR-T3.5          52¢    48¢     -4pt    A   kalshi (NO side edge)

Cross-venue opportunity:
  KXRECSSNBER-26 (kalshi) at 28¢ vs recession-2026-poly at 35¢
  Same event, 7¢ difference. Possible arb after fee adjustment.

Related Terms

Executable Edge

Executable edge is edge that can actually be traded — meaning the market has sufficient liquidity, tight enough spreads, and low enough fees for you to profitably capture the mispricing.

Edge

Edge is the difference between the market price of a prediction market contract and your estimated true probability. Positive edge means you believe the contract is mispriced in your favor.

Thesis-Implied Price

The thesis-implied price is the probability a contract should trade at according to your causal tree model. The difference between thesis-implied price and market price is your edge.

Heartbeat

The heartbeat is the automated monitoring engine that periodically scans for new information, runs evaluation cycles, and triggers strategy actions. It keeps your thesis alive and responsive 24/7.

Cross-Venue Analysis

Cross-venue analysis compares pricing of equivalent events across different prediction market platforms (like Kalshi and Polymarket) to find arbitrage opportunities or the best execution venue.

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