Prediction Market Glossary

Composite metric (0-100) measuring trading opportunity strength based on smart money consensus, divergence, and timing.

Automated Market Maker — algorithmic liquidity via mathematical formula instead of individual orders. Simpler but less efficient.

Return scaled to one year. Short-duration prediction markets can show extremely high annualized returns.

Programmatic trade execution via application programming interface. Enables algorithmic strategies and custom tools.

Managing total capital to survive losing streaks and maximize long-term growth. Never risk enough to be knocked out.

Bid is highest buyer price; ask is lowest seller price. The gap is the spread — the cost of immediate execution.

A market with exactly two outcomes — YES or NO. Winners pay $1 per share, losers pay $0.

Central Limit Order Book — order matching by price priority. Polymarket uses CLOB for transparent price discovery.

A market whose resolution depends on another event occurring first. Creates complex probability dynamics.

Aggregate directional view of smart wallets. Shown as STRONG YES, STRONG NO, or SPLIT based on positioning.

Automatically mirroring trades of selected wallets. When a copied wallet trades, the same executes in your account.

Degree to which markets move together. High correlation reduces diversification benefit. Essential for portfolio risk.

Spreading capital across uncorrelated markets. Prevents single bad outcomes from devastating total returns.

Peak-to-trough decline in portfolio value. Maximum drawdown shows worst historical decline — key risk metric.

Difference between market price and estimated true probability. Positive edge means mispricing in your favor.

A tradeable contract tied to a specific real-world event outcome. The building block of prediction markets.

Average expected profit per trade: (win rate x avg win) - (loss rate x avg loss). Must be positive for viable strategy.

An order that must execute immediately in its entirety or be cancelled completely. No partial fills allowed.

Taking offsetting positions to reduce risk. Buy NO against YES, or trade correlated markets in opposite directions.

Probability implied by market price. A $0.65 YES share implies 65% probability. Compare to your estimate to find edge.

US CFTC-regulated prediction market. Event contracts in USD with full regulatory compliance. Limited vs Polymarket selection.

Optimal sizing formula: bet = edge / odds. Maximizes growth but is aggressive — use fractional Kelly (25-50%).

Using borrowed capital to amplify positions. Most prediction markets are fully collateralized with no leverage available.

An order to buy or sell shares at a specific price or better. Limit orders sit in the orderbook until filled or cancelled.

Capital available for trading. Higher liquidity means less slippage and tighter spreads on execution.

A participant providing liquidity by posting continuous buy and sell orders. Earns the spread but assumes inventory risk.

An order executed immediately at the best available price. Guarantees execution but not price.

Largest percentage decline from peak to trough. The most important risk metric — shows worst case to survive.

A market with more than two possible outcomes. Each outcome trades independently; prices sum to approximately $1.

Real-time list of all buy and sell orders organized by price. Shows available liquidity and best bid/ask.

A possible result of a prediction market. Binary markets have two (YES/NO); multi-outcome markets can have many.

Simulated trading with real market data but no real money at risk. Used to test strategies and track bot performance.

Largest decentralized prediction market on Polygon blockchain. Uses USDC, CLOB matching, thousands of active markets.

Determining how much capital to allocate per trade. Prevents any single loss from crippling your bankroll.

A speculative market trading contracts on future event outcomes. Prices reflect aggregate probability estimates.

Chance of losing your entire bankroll given edge and sizing. Even profitable strategies have non-zero ruin risk if oversized.

Gross profits divided by gross losses. Above 1.0 is profitable; above 1.5 is healthy; above 2.0 is excellent.

The process of determining and settling a market outcome. Winning shares pay $1, losing shares pay $0.

Potential loss vs potential gain per trade. A $0.30 YES share risks 0.30 to gain 0.70 — roughly 1:2.3 ratio.

Risk-adjusted return metric. Excess return divided by volatility. Above 1.0 is good; above 3.0 is excellent.

PolyFire leaderboard of AI bots paper-trading real orderbooks. Users subscribe to winning bot signals.

The difference between expected and actual execution price. Increases in low-liquidity markets and with larger orders.

A wallet identified as consistently profitable. TradeSphere tracks 29,000+ wallets scored by historical performance.

The difference between best bid and best ask price. Tighter spreads indicate more liquid markets with lower costs.

A predetermined exit price to limit losses. In prediction markets, typically mental rather than automated.

Risk of rare extreme outcomes outside normal expectations. When impossible events happen — low-probability markets resolving YES.

A predetermined exit price to lock in gains. Prevents giving back unrealized profits during reversals.

How much returns deviate from average. Binary markets have inherently high per-trade variance.

Composite rating (0-100) for tracked wallets based on performance, consistency, and patterns. Higher = more reliable.

Percentage of profitable trades. High win rate alone does not guarantee profitability — depends on win/loss size ratio.