Prediction market glossary: 60+ terms explained in plain English

Prediction markets borrow words from stock trading, sports betting and crypto, and mix them together. This glossary explains the terms you'll actually run into, grouped by topic so you can read a section at a time. Where a term deserves more than a few lines, we link to a full guide.

New to all of this? Start with what prediction markets are and how they work, then come back here.

Prediction market basics

Event. The real-world thing being predicted, like an election or a football match. One event can hold several markets: a match might have markets on the winner, the total goals and whether both teams score.

Market. A single question you can trade, such as "Will Team A win?". Each market has its own shares, prices and rules.

Outcome. One possible answer to a market. In a simple market there are two: Yes and No.

Binary market. A market with exactly two outcomes, Yes and No. Most prediction markets are binary, even ones that look like they have many answers (see multi-outcome market below).

Share. The unit you buy and sell. A share of the winning outcome pays $1 when the market resolves. A share of the losing outcome pays $0.

YES and NO shares. The two sides of a binary market. If you think the event will happen, buy YES. If you think it won't, buy NO. Since exactly one of them pays $1, their prices add up to about $1.

Collateral. The money that backs every share. On Polymarket it's pUSD, a dollar stablecoin on the Polygon network. In practice, you can treat it as dollars: one winning share is worth $1.

Position. The shares you hold in a market. "I have a position of 200 YES" means you own 200 YES shares.

Peer-to-peer. Every trade is between two traders. There's no bookmaker taking the other side of your bet. Prediction markets vs sports betting covers what this changes for you.

Prices and odds

Price. What a share costs, quoted in cents from 1¢ to 99¢. A share at 35¢ costs $0.35 and pays $1 if it wins.

Implied probability. The chance the market is pricing in. Because a share pays $1, its price in cents reads as a percentage: YES at 35¢ means roughly a 35% chance.

Decimal odds. The betting-style way to express the same price: 1 ÷ price. A 25¢ share is decimal odds of 4.00, so $1 staked returns $4 if it wins. Prediction market odds and probability has a full conversion table.

Mid price (midpoint). Halfway between the best bid and the best ask. If the best bid is 38¢ and the best ask is 41¢, the mid is 39.5¢. Market pages usually display the mid, but you buy at the ask and sell at the bid.

Last traded price. The price of the most recent trade. In a quiet market it can be hours old and far from where you could trade now.

Volume. The total value of shares traded in a market. High volume means a lot of people are trading it, but it says nothing about how much money is in the book right now.

Open interest. The money currently backing a market's shares. Every YES/NO pair in existence is backed by $1, so open interest tells you how much is actually riding on the outcome right now, unlike volume, which counts every trade ever made.

Longshot bias. The tendency of traders to overpay for unlikely outcomes. A 3¢ share feels like a cheap lottery ticket, so it can trade above its fair price.

Orders and the orderbook

Orderbook. The live list of every open buy and sell order in a market, sorted by price. The Orderbook widget lesson shows how to read one.

Bid. An order to buy. The best bid is the highest price any buyer is offering right now. It's what you'd get if you sold immediately.

Ask. An order to sell. The best ask is the lowest price any seller will accept. It's what you'd pay if you bought immediately.

Spread. The gap between the best bid and the best ask. With a bid of 38¢ and an ask of 41¢, the spread is 3¢. A tight spread usually means a liquid market. A wide one means trading in and out costs you.

Liquidity. How easily you can trade without moving the price. A liquid market has many orders near the current price on both sides.

Depth. How many shares are available at each price level. A deep book can absorb a $5,000 order with little price change. A shallow one can't.

Slippage. The difference between the price you expected and the average price you actually got. Say you buy 1,000 YES and the book has 500 shares at 40¢ and 500 at 42¢. You pay $410 in total, an average of 41¢: 1¢ of slippage against the 40¢ best ask.

Market order. An order that trades right away at the best available prices. Fast, but you pay the spread and any slippage. On Preddy, market orders carry a 0.5% taker fee.

Limit order. An order to buy or sell at a price you set, or better. If it can't fill right away, it waits in the book until someone takes it. Limit orders on Preddy have no fee. See market vs limit orders for when to use each.

Resting order. A limit order sitting in the book waiting to fill. You can cancel it at any time before it fills.

GTC (good 'til cancelled). A limit order that stays in the book until it fills or you cancel it, rather than expiring.

Maker. The trader whose resting order was in the book first. Makers add liquidity.

Taker. The trader whose order matched against a resting order. Takers remove liquidity. On Preddy, takers pay the 0.5% fee and makers pay nothing.

Fill. An executed trade. "My order filled at 52¢" means it went through at 52¢.

Partial fill. When only part of your order executes. You bid for 500 shares at 30¢, a seller hands you 200, and the other 300 keep waiting in the book.

Tick size. The smallest price step a market allows, usually 1¢. Some markets, often those near 0¢ or 100¢, trade in 0.1¢ steps.

Split, merge and redeem

Split. Turning $1 into one YES share and one NO share of the same market. Useful if you want to sell one side into the book: split $100, sell 100 NO, and you're left holding 100 YES.

Merge. The reverse: one YES plus one NO of the same market turn back into $1. If you hold both sides, merging gets your money out without selling into a thin book. Split and merge are free on Preddy.

Redeem (claim). After a market resolves, swapping your winning shares for $1 each. On Preddy this is the Claim button, and you can switch on auto-redeem. The claim winnings lesson shows how.

Resolution and the UMA oracle

Resolution. The moment a market's outcome becomes official and winning shares become worth $1. A match can end hours before its market resolves. How prediction markets resolve explains the full process.

Resolution rules. The written description of exactly what counts as YES, when, and according to whom. They decide the outcome, not the market's title. Read them before you trade.

Resolution source. The authority named in the rules for checking the result: an official election body, a league's website, a specific data feed.

Oracle. The system that brings a real-world result onto the blockchain so the market can settle.

UMA. The oracle Polymarket markets use. UMA's Optimistic Oracle assumes a proposed answer is correct unless someone challenges it in time.

Proposal and bond. To resolve a market, a proposer posts the outcome along with a bond, money they lose if the answer turns out to be wrong.

Challenge period. The window, typically about two hours, during which anyone can dispute a proposed outcome. If nobody does, the outcome stands.

Dispute. A challenge to a proposed outcome, backed by the challenger's own bond. Disputes can escalate to a vote by UMA token holders, which takes days. Until then, the market stays unresolved.

Market close / end date. When trading stops or the event is scheduled to finish. It isn't the same as resolution, which comes after.

Multi-outcome markets

Multi-outcome market. A question with many possible answers, like "Who will win the league?". It's built as a set of separate YES/NO markets, one per answer, and their YES prices add up to about 100%. Multi-outcome markets explains how to trade them.

Negative risk (neg risk). A setup for multi-outcome events where exactly one answer can win. Holding NO on one candidate is then equivalent to holding YES on every other candidate, and the platform lets you convert between the two. This keeps prices across the set consistent and frees up your capital.

Bracket. One range in a market on a number, like "24–25°C" in a temperature market or "100–119 posts" in a post-count market. Each bracket trades as its own YES/NO market.

Strategy, risk and P&L

Average price. What you paid per share across all your buys. Buy 100 YES at 40¢ and another 100 at 50¢, and your average price is 45¢.

Unrealized P&L. Profit or loss on shares you still hold, at today's price. Holding 200 YES with a 45¢ average while the price is 60¢, you're up $30 on paper.

Realized P&L. Profit or loss you've locked in by selling or redeeming. Sell 100 of those shares at 60¢ and you've realized $15. The other 100 still carry $15 of unrealized profit.

Expected value (EV). What a trade earns on average if you could repeat it many times. For one share it's your probability minus the price: buy at 40¢ when you think the true chance is 50%, and your EV is +10¢ per share before fees.

Edge. The gap between your probability and the market's. If you have no edge, you're paying fees and the spread to flip a coin.

Bankroll. The total money you've set aside for trading. Sizing rules work as a percentage of it.

Kelly criterion. A formula for how much of your bankroll to put on a trade with an edge. For a share priced at c that you think wins with probability p, the Kelly fraction is (p − c) ÷ (1 − c). At p = 60% and c = 50¢, that's 0.10 ÷ 0.50 = 20% of your bankroll. Most traders bet a fraction of that, because their p is an estimate. More in position sizing and risk.

Hedge. A second trade that reduces the risk of your first one. If you hold YES on a candidate and the price has run up, buying some NO locks in part of the gain whatever happens.

Arbitrage. A trade that profits regardless of the outcome. If the YES prices in a multi-outcome market where exactly one answer must win add up to 97¢, buying one YES of each costs 97¢ and pays exactly $1. In practice fees, slippage and the time your money is locked up eat into gaps like this.

Stop loss. An order that sells your position automatically if the price falls to a level you set. Buy at 60¢, set a stop at 45¢, and the most you plan to lose is about 15¢ per share. It sells at the best available price once triggered, so a fast-moving market can fill it below your level. See stop losses on Preddy.

Take profit. The opposite of a stop loss: selling automatically once the price rises to a target.

People and tools

Whale. A trader who moves large amounts of money. Whale trades can shift prices on their own, so many traders watch them. Preddy alerts can notify you, including on Telegram, when a wallet you follow trades.

Smart money. Traders with a strong track record, whose positions some people treat as a signal. A good record is worth checking over many trades, not one lucky call.

Copy trading. Automatically mirroring another trader's buys and sells with your own money and limits. It can work, but it has traps, covered in copy trading on prediction markets. Preddy's setup is explained in the copy trading docs.

Market maker. A trader, often a bot, who keeps buy and sell orders on both sides of a market and earns the spread. Market makers are why you can usually trade instantly.

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