Market makers on Polymarket how do they make money? Actually super simple (including a foolproof explanation)

Many people think market makers make money by predicting outcomes.
In fact, on Polymarket, this is much easier to understand than traditional exchanges.
Here's an entry point for easy viewing and playing:
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1) Core Concept (Understand in 20 seconds)
You set two prices:
Buy Price < True Value < Sell Price
Then repeat one thing:
Buy low → Sell high.
As long as you guess the true value correctly and the spread is wide enough,
you can make big money with a small advantage.
2) What is “True Value”?
Simply put, it’s the expectation.
For example, an event: YES can get back $1, NO gets back $0.
Then the mid-price for YES should reflect its probability of happening.
Mathematically, the best guess is the average.
3) Where does the money come from?
Suppose you sell a YES share at price a (sell price), and its actual value is X:
Your profit = a - X
If you buy at price b (buy price), and the actual value is X:
Your profit = X - b
If the buy and sell orders are roughly half and half in the market, the expected profit per trade is:
(Sell Price - Buy Price) ÷ 2
Simply put: profit = half of the spread.
4) Why not make the spread huge?
Because no one will trade with you.
Too wide a spread → more profit per trade, but no transactions happen.
Too narrow → more transactions, but less profit per trade.
You need to find a balance point to maximize “transaction speed × profit per trade.”
5) How to do it specifically on Polymarket?
True value = the probability of YES happening based on all current information.
Your quoting strategy:
Buy Price = True Value - Spread/2 - Adjustment
Sell Price = True Value + Spread/2 + Adjustment
Adjustment includes: your current inventory (inventory bias), fees, risk buffers.
For example, if you hold a lot of YES shares, you might lower your buy price and raise your sell price to guide others to trade against you.
6) Using models makes it more complex
Advanced strategies involve Monte Carlo simulations, calibrating option volatility, etc.
But on Polymarket, most of the time, your “model” is just a probability estimate.
So this is actually the clearest way to understand market making.
7) The real ways to make money
Total profit from market making comes from three parts:
· Capturing the spread
· Subtracting hedging costs
· Subtracting slippage and fees
Your job is to:
· Set the mid-price accurately
· Choose the right spread width
· Manage inventory
· Control risk
8) Shift in mindset
Retail traders worry every day: “Will this YES go up to 70 cents?”
Market makers think: “Is a fair price 62 cents? Can I hang around 61/63 all day to create friction in the market?”
It’s that simple.
Algorithmic market making isn’t some mysterious black tech; it’s applying probability + understanding market structure.
Once you get it, there’s no going back.
To follow smart money on Polymarket, I recommend using this bot:
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#Polymarket