LiveTradeBench: Seeking Real-World Alpha with Large Language Models (2511.03628v1)

Abstract: LLMs achieve strong performance across benchmarks--from knowledge quizzes and math reasoning to web-agent tasks--but these tests occur in static settings, lacking real dynamics and uncertainty. Consequently, they evaluate isolated reasoning or problem-solving rather than decision-making under uncertainty. To address this, we introduce LiveTradeBench, a live trading environment for evaluating LLM agents in realistic and evolving markets. LiveTradeBench follows three design principles: (i) Live data streaming of market prices and news, eliminating dependence on offline backtesting and preventing information leakage while capturing real-time uncertainty; (ii) a portfolio-management abstraction that extends control from single-asset actions to multi-asset allocation, integrating risk management and cross-asset reasoning; and (iii) multi-market evaluation across structurally distinct environments--U.S. stocks and Polymarket prediction markets--differing in volatility, liquidity, and information flow. At each step, an agent observes prices, news, and its portfolio, then outputs percentage allocations that balance risk and return. Using LiveTradeBench, we run 50-day live evaluations of 21 LLMs across families. Results show that (1) high LMArena scores do not imply superior trading outcomes; (2) models display distinct portfolio styles reflecting risk appetite and reasoning dynamics; and (3) some LLMs effectively leverage live signals to adapt decisions. These findings expose a gap between static evaluation and real-world competence, motivating benchmarks that test sequential decision making and consistency under live uncertainty.

• The paper introduces a live trading benchmark using real-time data streaming to evaluate LLM-based agents across U.S. equities and prediction markets.
• It formalizes portfolio management as a POMDP, integrating agent memory, tool use, and explicit reasoning to achieve adaptive, market-specific allocations.
• Empirical results reveal that high general-purpose LLM reasoning scores do not correlate with superior trading outcomes, underscoring the need for specialized benchmarks.

LiveTradeBench: A Live Multi-Market Benchmark for LLM-Based Trading Agents

Motivation and Problem Formulation

The proliferation of LLMs has led to near-saturation on static benchmarks, yet these evaluations fail to capture the sequential, uncertain, and feedback-driven nature of real-world decision-making. LiveTradeBench addresses this gap by introducing a live trading environment for LLM agents, emphasizing three core principles: (i) live data streaming to eliminate information leakage and capture real-time uncertainty, (ii) a portfolio-management abstraction for multi-asset allocation and risk management, and (iii) multi-market evaluation across structurally distinct environments—U.S. equities and Polymarket prediction markets.

The portfolio management task is formalized as a POMDP, where the agent receives partial observations comprising current positions, market prices, and contextual news, and outputs a portfolio allocation vector. The environment simulates real-world market transitions and portfolio rebalancing, with the agent’s actions mapped directly to executable trading operations.

Figure 1: Market selection in LiveTradeBench, contrasting the dynamics of U.S. equities and Polymarket contracts, and illustrating the diversity of assets across domains.

Environment and Agent Architecture

Observation and Action Spaces

At each timestep, the agent observes its current portfolio, real-time asset prices, and a curated set of recent news headlines. The action space is the probability simplex over assets, representing the proportion of capital allocated to each asset (long-only, no shorting). For prediction markets, each binary contract is split into YES/NO assets, and the agent must allocate to only one side per market.

Figure 2: Observation and action space for LiveTradeBench, showing the integration of position, price, and news context, and the mapping to portfolio allocation decisions.

Agent Design

Agents are instantiated as LLMs wrapped in a React-style framework, equipped with three key capabilities: (i) tool use for structured data extraction and feature engineering from raw observations, (ii) memory for maintaining a fixed-length history of past observations and actions, and (iii) explicit reasoning via chain-of-thought and ReAct prompting. The agent’s policy is a function of the current observation and memory, outputting a JSON-encoded allocation vector and a natural language rationale.

Figure 3: Agent-environment interaction loop, with the environment streaming live data and the agent leveraging tools, memory, and reasoning to generate adaptive portfolio allocations.

Experimental Protocol and Evaluation Metrics

Model Pool and Setup

Twenty-one LLMs spanning six major families (OpenAI, Anthropic, Google, xAI, Meta, Qwen, DeepSeek, Moonshot) are evaluated in both the U.S. stock and Polymarket environments. All models are prompted with identical context and instruction templates, and outputs are parsed and validated for compliance with allocation constraints.

Metrics

Performance is assessed using cumulative return, Sharpe ratio, maximum drawdown (MDD), win rate, and volatility. These jointly capture profitability, risk-adjusted efficiency, downside protection, and stability.

Empirical Findings

Generalization and Market-Specificity

There is negligible correlation between trading performance in the stock and prediction markets (Sharpe ratio correlation ≈ 0), indicating that strategies do not generalize across market regimes. For example, GPT-4.1 achieves the highest cumulative return in stocks but underperforms in Polymarket, while Qwen2.5-72B-Instruct and Grok-4 display more stable cross-market behavior.

LLM Benchmark Scores vs. Trading Performance

Contrary to expectations, LMArena scores are uncorrelated or negatively correlated with trading outcomes (Spearman ρ ≈ 0.05 in stocks, −0.38 in Polymarket). High general-purpose reasoning ability does not translate to superior financial decision-making, underscoring the inadequacy of static benchmarks for evaluating real-world competence.

Figure 4: Correlation between LMArena score and Sharpe ratio in both markets, demonstrating the disconnect between general LLM ability and trading performance.

Portfolio Management Styles

Distinct risk and allocation styles emerge across models. Some (e.g., Claude-Opus-4.1, Grok-4) are conservative, prioritizing low volatility and drawdown, while others (e.g., Kimi-K2-Instruct, GPT-5) are risk-seeking. Cash management patterns also vary, with some agents maintaining high liquidity buffers and others remaining fully invested except during extreme volatility.

Reasoning Models and Overfitting

Models optimized for explicit reasoning (DeepSeek-R1, Qwen3-235B-A22B-Thinking, GPT-o3) do not outperform others and often exhibit excessive volatility, suggesting that the type of reasoning beneficial for math or code tasks does not transfer to financial domains. Over-deliberation can degrade trading consistency.

Analysis: Adaptivity and Decision Rationale

Rolling-k Delta Analysis

To test adaptivity, the rolling-k delta analysis delays agent actions by k days. Performance degrades as k increases, especially in Polymarket, confirming that agents are not random but respond to contemporaneous signals. In stocks, the effect is muted, reflecting smoother market dynamics.

Figure 5: Rolling k-delta analysis on U.S. stocks, quantifying the impact of delayed rebalancing on cumulative returns.

Reasoning Trace Annotation

Automated annotation of reasoning traces reveals that agents most frequently cite news in Polymarket and price history in stocks, with position information less dominant. Many decisions integrate multiple information sources, indicating nontrivial reasoning.

Figure 6: Proportion of reasoning traces referencing position, price, or news, highlighting market-specific information usage.

Case Studies

U.S. Stock Market: Cash Dynamics

During bullish phases (e.g., tech rally on August 28), agents reduce cash allocations, while sharp drawdowns (October 10) trigger defensive increases in cash. The best-performing agents preemptively shift to cash before downturns, as evidenced by their reasoning traces.

Figure 7: Case paper for U.S. stocks, showing average cash ratio dynamics and model-specific reasoning during a market drawdown.

Polymarket: Event-Driven Trading

In the "Russia × Ukraine ceasefire in 2025?" market, agents react to news events with abrupt allocation shifts. On October 13, optimistic headlines prompt a switch to YES positions, but the market does not move, resulting in no profit. On October 17, credible diplomatic news leads to profitable position holds, demonstrating the challenge of distinguishing signal from noise.

Figure 8: Case paper in Polymarket, illustrating allocation shifts and reasoning traces in response to news events.

Limitations and Future Directions

LiveTradeBench currently omits transaction costs, liquidity constraints, and slippage, potentially overestimating achievable returns for high-turnover strategies. The observation and action spaces are limited by LLM context length and the number of supported markets. Agent design is restricted to basic tool use and memory; future work should incorporate richer analytical tools, hierarchical memory, multi-agent interactions, and reinforcement learning-based training. Extending the framework to support longer horizons, richer news context, and more complex market universes is essential for advancing the realism and challenge of the benchmark.

Conclusion

LiveTradeBench establishes a new paradigm for evaluating LLM-based agents in live, multi-market trading environments. The results demonstrate that static benchmarks are insufficient proxies for real-world competence, and that market-specific, adaptive, and risk-aware strategies are essential. The benchmark provides a foundation for future research on adaptive, financially grounded, and socially intelligent agent systems, and is released as an open-source package with a real-time web interface for community use.