Earn $8,000 in 4 days: The Complete Practical Strategy for Polymarket LP Market Making

_Original Title:__My POLYMARKET LP Rewards Strategy _
Author: josele.sol (@joselebetis2)

Compiled by Odaily Planet Daily (@OdailyChina); Translator: Asher (@Asher_0210)

Over the past few days, I have been continuously testing and optimizing a liquidity provider (LP) strategy on Polymarket. In just 4 days, I accumulated approximately $6,000 in Sponsored LP rewards and $2,000 in trading profits.

Based on these practical results, I have outlined a complete market-making framework covering market selection, order structure, position management, and risk control. It’s not the only solution, but under current capital scale, risk appetite, and time investment, this approach has proven to be the most stable and efficient.

First, choosing the right markets is more important than you think

Market selection determines over 50% of the outcome. High-quality markets typically feature narrower spreads, healthier order books, clearer trading paths, and more stable reward density. The filtering logic mainly focuses on these four points:

High trading volume + small spread

Prioritize markets with active trading and naturally narrow spreads. These markets are easier to execute continuous trades on, with less slippage, more stable order books, and better conditions for ongoing market-making rewards.

Events with clear timing

Markets tied to events with precise timing (such as competitions, policy announcements, or scheduled results) are more predictable. Clear timelines help in planning ahead and reduce risks from completely random fluctuations.

Presence of “quiet periods”

Markets with low news flow phases, such as nighttime or before a match starts, are more suitable for market-making. During these times, price volatility is usually lower, making it easier to place orders close to the market price.

Incentive strength relative to liquidity

The key metric is “how much reward can be earned per dollar of liquidity.” When incentives are more concentrated relative to total liquidity, reward density is higher, and overall market-making efficiency improves.

Second, core market-making principles

Bidirectional orders (YES + NO)

Always place orders around the mid-price, simultaneously on both sides with YES and NO orders. The core goals are: capturing spreads, earning incentives, and maintaining market-making eligibility. Bidirectional orders essentially serve to maintain the “liquidity provider” role, not to bet on a direction.

Position management (avoid excessive unidirectional exposure)

If trades consistently favor one side, it indicates higher risk rather than stable profits. When one side sees too much trading activity, you can:

• Place counter-orders near the market price;
• Merge orders to withdraw liquidity;
• Actively restore balance through market orders.

The main goal is to keep a neutral structure, avoiding shifting from a market maker to a directional speculator.

Proactively withdraw during market chaos

In the event of sudden news, real-time critical events, or high volatility phases, it’s advisable to widen spreads or temporarily stop placing orders. Maintaining tight spreads during sharp fluctuations is not advantageous; it may instead make you the counterparty to others exiting liquidity. Disciplined proactive withdrawal is often more important than continuous participation.

Third, laddered order structure

Instead of placing a single large order on each side, a more robust approach is to build a “ladder” of multiple orders at different price levels. This provides continuous liquidity and reduces the risk of being precisely “poked through” during rapid price movements. The structure is as follows:

• Small orders near the mid-price (narrower spreads): Increase the chance of execution, maintain steady trading rhythm, and continuously earn incentives and fees;
• Larger orders farther from the mid-price (wider spreads): Form a buffer zone during price swings, reduce the risk of quick sweeps, and allow more room for position adjustments.

The laddered structure reduces the chance of being “precisely harvested,” disperses trades across different levels, and makes position control easier—especially when participating in multiple markets simultaneously on Polymarket.

Fourth, spread rules

Set a target spread first, then dynamically widen or narrow orders based on market conditions. The real advantage isn’t always keeping spreads very tight around the clock, but rather only tightening when the market is relatively stable and safe.

Main adjustment triggers include:

• Sudden increase in volatility: When prices jump rapidly, widen spreads proactively to avoid being repeatedly swept;
• Major news or real-time events: During significant news or critical moments, market re-pricing can be very fast. Widen spreads or pause orders as needed;
• Position imbalance: If trades favor one side persistently, widen the spread on the heavily traded side and slightly tighten the other side to rebalance.

In summary, when markets become unstable, prioritize widening spreads or temporarily retreat; once stability returns, tighten orders back toward the market price.

Fifth, position management

Position imbalance is the real killer for most market makers.

If trades keep favoring one side, it’s not “earning more,” but rather accumulating unbalanced positions and increasing risk. The goal is to provide continuous orders while avoiding being trapped by unidirectional exposure.

When trades clearly favor one side, you can:

• Reduce order size on the advantaged side;
• Strengthen quotes on the other side to accelerate rebalancing;
• Make gradual, continuous adjustments to avoid emotional or abrupt hedging.

Two ways to clear positions

Method 1: Sell existing positions. Gradually offload unbalanced positions to reduce risk and free up capital for further deployment.

Method 2: Fill gaps and merge. If YES and NO positions are asymmetric, buy the missing side and perform a merge on Polymarket to eliminate exposure and free funds.

Avoid becoming “liquidity taker”

This is less about being clever and more about disciplined execution. Sometimes, placing orders very close to the market price isn’t advantageous but simply accepting others’ rapid exit orders.

Situations to avoid placing orders near the market include:

• Major announcements or real-time critical events: Market re-pricing is faster than manual adjustments, risking being swept;
• Low liquidity events: Insufficient trading activity and chaotic price jumps often lead to poor trade quality;
• Sudden price discovery events: New information causes the market to search for a new equilibrium, with no stable direction yet.

A more prudent approach is to widen spreads significantly, reduce order sizes, or temporarily exit until the order book stabilizes. Only then re-engage to avoid passive risk-taking during volatile periods.

Sixth, time management

This strategy doesn’t require 24/7 monitoring, but it’s not “set and forget.” Most of the time can be spent in the background, with readiness to respond quickly when market conditions change.

Time allocation roughly:

• 10–20% active management: Deploy funds, adjust ladder structures and spreads, modify positions;
• 80–90% passive operation: System continuously places orders, but you should stay alert.

The key is to always be ready to respond. Typically, I operate near my computer with mobile alerts enabled, so I can immediately adjust spreads, pause orders, or reorganize when market moves occur.

Seventh, recommended tools

Betmoar (@betmoardotfun)

Used for market screening and data observation. It provides clearer visualization of market structure and reward distribution, especially when filtering for markets with higher Sponsored LP Rewards.

Currently, Polymarket’s internal reward display and filtering are not very intuitive, so external tools help identify markets with higher reward density more efficiently. (Although improvements are ongoing, the info obtained here is often more accurate.)

Polycule (TG Bot)

Mainly for wallet tracking and trade notifications. Other features are not core but help with timely alerts and clear records, making it easier to monitor trades and positions.

Additionally, using PolyRewards (@PolyReward) for reward tracking allows quick overview of earnings and overall data performance (link:).

The above is my personal LP market-making strategy, not the only method. It suits the current capital scale, risk tolerance, and time commitment. Results may vary significantly under different conditions, and incentive rules and market environments can change at any time.