How Beacon Works
Our two-signal methodology for reading market pressure in prediction markets.
Overview
Beacon combines two complementary inputs:
The Wall
Orderbook liquidity analysis using logit-weighted depth calculations.
Sharp Money
Position-weighted P&L analysis of top holders on each side.
The Wall
The Wall analyzes orderbook depth to understand where liquidity is positioned. Unlike simple depth calculations, we use logit-based weighting to properly handle prediction market probability space.
Why Logit Weighting?
In prediction markets, a 4c move at 5% is approximately 10x more significant than a 4c move at 50%. Standard linear analysis misses this - logit transformation properly captures it.
Orders near the midpoint receive higher weights, while orders at extreme prices (near 0c or 100c) are de-weighted. This focuses on liquidity that matters for price discovery.
Interpretation: More weighted bid depth (buying YES) relative to ask depth (selling YES) indicates bullish positioning.
Sharp Money
Sharp Money tracks the positions of top holders on each side and weights them by profitability and position size.
Calculation
Beacon blends holder performance with orderbook structure using the following weighting:
This approach gives more influence to profitable traders with meaningful size, filtering out small and noisy positions.
Interpretation: When profitable traders are weighted toward YES, it suggests informed money sees value on that side.
Signal Thresholds
The final Beacon score is on a 0-100 scale, with the following interpretation:
High confidence bullish signal from Wall depth imbalance.
Moderate bullish signal. Indicators tilt toward YES but not decisively.
No clear directional bias from orderbook depth.
Moderate bearish signal. Indicators tilt toward NO but not decisively.
High confidence bearish signal from Wall depth imbalance.
Limitations
- 1.Not trading advice. Beacon is an analytical tool, not a recommendation to buy or sell.
- 2.Historical trader performance. Sharp Money relies on historical profitability, which does not guarantee future edge.
- 3.Thin orderbooks. Markets with low liquidity may produce unreliable Wall signals.
- 4.Data delays. Cached data may be up to 30-60 seconds old during volatile periods.
Frequently Asked Questions
What is the Beacon score?
The Beacon score is a 0-100 metric that blends orderbook liquidity analysis (The Wall) with sharp-holder positioning. Higher scores indicate stronger YES pressure.
How is The Wall calculated?
The Wall analyzes orderbook depth using logit-based weighting. Orders near the midpoint price receive more weight than those at extreme prices (near 0c or 100c), as they represent more meaningful price discovery.
What is Sharp Money?
Sharp Money tracks the positions of top holders and weights them by profitability and position size to surface informed directional bias.
How often is the Beacon updated?
Beacon scores are recalculated when data is refreshed. Orderbook data is cached briefly, and holder data is cached slightly longer to balance freshness with API limits.
What do the Beacon signal levels mean?
Strong YES (80+): High confidence bullish signal. Lean YES (60-79): Moderate bullish signal. Neutral (40-59): No clear directional bias. Lean NO (20-39): Moderate bearish signal. Strong NO (<20): High confidence bearish signal.